Getting the Most Out of Life

Russ Roberts on opportunity costs and getting the most out of life:

One of the challenges of being an economist is explaining what you do for a living. People understand that one of the things a professor of economics does is teach economics. But what is that, exactly? Most presume it has something to do with investing and financial management. When I once told my seatmate on an airline flight that I was an economist, she said, what a shame, my husband loves the stock market. Hmm. I didn't tell her that other than the advantages of investing in indexed mutual funds, I know next to nothing about the stock market.

My seatmate might have profited from reading Alfred Marshall who called economics "the study of mankind in the ordinary business of life." This was the enterprise of Marshall and Adam Smith and Friedrich Hayek and Milton Friedman: they tried to understand what people do and the implications of their behavior for the society at large.

But my favorite definition of economics is a variant of Marshall's. It comes from a student who heard it from another teacher of hers: economics is the study of how to get the most out of life. I like this because it strikes at the true heart of economics—the choices we make, given that we can't have everything we want. Economics is the study of infinite wants and finite means, the study of constrained choices. This is true for individuals and governments, families and nations. Thomas Sowell said it best: no solutions, only tradeoffs. To get the most out of life, to think like an economist, you have to be know what you're giving up in order to get something else.

I love this definition of economics and find it to be very true!  Sowell's words are also particularly instructive.  Next to Milton Friedman, reading Thomas Sowell is what got me hooked on economics.

Read all of Dr. Robert's essay.  It's very good.

(HT Cafe Hayek)