Economics demystified

Aqilah Rahman

At the risk of sounding ignorant, I’ll confess that I don’t know much about economics. I’ve heard of supply and demand here and there but I don’t really know anything beyond that; pretty embarrassing, to be honest.

That said, there’s an abundance of learning resources online, and I recently happened to come across one that caught my interest – Planet Money Summer School.

Every Wednesday, from July 8 to September 2, Planet Money from NPR will be releasing a podcast where they discuss a real-life problem from previous episodes and have their “economists-in-residence” break down the economic principles behind each story.

Each episode hosted by Robert Smith will run for about half an hour. He’s joined by economists Justin Wolfers and Betsey Stevenson, professors at the University of Michigan.

According to the NPR website, the show is for “anyone who wants to see the world through the lens of an economist, from the econ-curious life-long learners, to the first-year analyst feeling imposter syndrome, to everyone who wants to feel a little less overwhelmed when they sit down to make financial decisions.”

The series will cover concepts such as public goods and the tragedy of the commons; tariffs and regulations; trade-offs; imperfect information; and moral hazard, among other things.

First episode

The first episode aired on July 8, and right off the bat, Wolfers explained that “economics is not about money”. Instead, economics is something that can help us understand things like the stock market, marriage, crime and decisions we make in our everyday life, he said.

As Smith put it, economics is all about choices. They discussed one topic many of us can relate with – dating, or the difficulty of dating, to be precise.

The story was a selection from their 2014 episode about a woman named Lisa Chow, who felt she needed a new approach to dating after a series of long-term relationships.

To be more efficient, Lisa made an Excel spreadsheet and went on to “50 first dates”. For each date, Lisa wrote down her date’s name and one memorable detail. Lisa went on second dates with 22 of them. For third dates, Lisa took them to a social gathering with some casual friends to “observe them in a social setting”.

She mentioned one of her dates, number 45, whom she was seeing for about six weeks but Lisa decided it wasn’t going to work out. So she cut things off and then the next week, she went on a date with Kevin.

“And instantly, I knew I didn’t make a mistake, you know?” said Lisa, who eventually married Kevin.

She described the whole situation as an opportunity cost, which means to give up one thing in exchange for another.

In Lisa’s case, the opportunity cost of staying in a relationship that didn’t feel right was to “give up the opportunity to meet someone who might be better”, said Stevenson.

The concept of opportunity cost also applies to other real-life situations, like limiting calories intake where you give up one food for another, said Justin.

Smith, Stevenson and Wolfers also discussed sunk cost, which is a cost that can’t be reversed. An example is sitting for a movie we don’t enjoy, said Stevenson.

It doesn’t matter how much we’ve paid for the ticket, it’s a sunk cost and we can’t get our money back. Walk out.

After that, they discussed thinking on the margin, which Smith described as a decision whether or not to have one more of something. It’s like when we buy six pieces of chicken nuggets and are offered an extra four for free, he said.

Should we take the extra four nuggets? In terms of money, it doesn’t cost us any more than what we’re already paying but what if we’re saving up calories for an even better meal later? The trio also touched on the story of high Uber prices during a snowstorm in Manhattan in 2014, and how the price acted as an incentive for more drivers to be on the road despite the snowstorm.

Impressions

Overall, I found the first episode to be very informative and easy to follow.

Wolfers and Stevenson work well together, and they explained everything in simple terms based on relatable real-life examples and personal experience.

Throughout the episode, Smith provided some additional commentary to complement Wolfers and Stevenson’s explanations, and I find this very helpful.

In terms of depth, Planet Money probably left out a lot of details to keep the show light and simple.

Depending on the listener, this may be a pro or a con, but for someone like me who’d like to get familiar with the basics, I find the content to be just right and I look forward to the upcoming episodes.