To give you a sense of what is acceptable writing and what is unacceptable writing, here we present six essays. These essays are possible student answers to three assignments which are similar to assignments you might receive in class. Essays 1 and 2 deal with the following question: Professions have a tendency to develop a separate terminology that only members can follow. One reason for doing so might be described as society-serving and another might be described as self-serving. In a short essay discusses which of these two reasons do you think is more important in the case of economic jargon. Essays 3 and 4 deal with the following question:
The Heisenberg principle states that there is a limit to our knowledge of reality because as we study certain physical phenomena we change them. Might a Heisenberg-type principle be relevant to economics? Write a short essay explaining why or why not. Essays 5 and 6 are responses to the following:
In a Wall Street Journal article, a woman named Ms. Luhrs is quoted as saying, “If you’re continually consuming, you have to keep working, you can’t get off the treadmill.” Write a short essay explaining whether this a rational statement. After presenting all six essays we grade them and provide a brief overall assessment of the essays. We also provide some specific comments about what we liked and what we didn’t like. When you read our comments, think about the process of grading. That process has, by its nature, both an objective and a subjective element to it. The objective element of grading is the easiest. The objective part of the grade is based on considerations such as: Does the essay answer the question posed? Are the grammar, formatting, spelling, and standard elements of style up to speed?
There is no debate about these relatively objective issues. For example, if you don’t answer the question you’re supposed to, you probably won’t do well on the essay. And if your paper has many grammatical mistakes, you’re in trouble. The subjective element of grading works like a wild card in the grading process. Usually, there are many ways a question can be answered. Some ways will strike a chord with your reader; some won’t. The same is true with discretionary elements of style. Some professors may like your style; some won’t.
For example, Colander, the guy who wrote your textbook, has a very informal, matter of fact, style. His style turns off a number of economics professors. Some of these consider his work abominable because of that style; they assign his book nonetheless, because, on objective grounds, it is a great book. (That’s a Colander ironic stylism, in case you were wondering.) And still others, we’re happy to say, like his style. (If they didn’t the book wouldn’t sell, and the Colander text would be eliminated from the market.) The point of this example is that wild cards average out, so you shouldn’t concern yourself too much with the discretionary elements of style. If you get the objective elements right, you’ll most likely do well. So concentrate on objective elements first. Essay 1
Economist’s Jargon: Unite and Divide
The economics profession’s jargon serves a variety of purposes. For example, their common terminology serves to make for more precise communication. It allows ideas to be communicated clearly and exactly. This exactness and clarity of terminology serves society by allowing economists to discuss economics with each other and with society with clarity so that other economists have a better understanding of what an economist is saying. A common terminology also serves to divide insiders from outsiders. For outsiders, for example economic students, who do not have a clue what these terms mean, economists’ terminology is exclusionary. It makes economists the gatekeepers of economic ideas. Economists’ terminology serves as a barrier to entry, restricting the supply of economists, and increasing the value of the services provided by existing economists. Which of these two reasons is the strongest? To answer that question let us consider two examples given by Amanda Bennett, the author of The Wall Street Journal article, “Economists + Meeting = A Zillion Causes and Effects” [The Wall Street Journal, January 10, 1995].
The two examples are the concepts of externality and utility, Why do economists use these terms? Based on her article, and on my classroom experience, I would judge that, of the two reasons, the self-serving reason is the stronger. Essentially, economists create their terminology primarily to make life difficult for students. Consider the first example: externality. Why no simple call externalities “unintended side effects”? It would be much easier for students to comprehend. Or alternatively, consider the second, utilities. How much clarity can the concept, utility, provide when the text tells us that, essentially, it means happiness? If it means happiness, why not use the term, happiness? The very fact that Ms. Bennett can provide a simple translation of economists’ jargon suggests that the jargon was unneeded for precise communication.
And even, if there is some value added in terms of clarity of the jargon, do its costs in additional memorization for students, outweighs the gain. For me, the answer is clearly, no. Actually, to answer anything other than economists are self-serving would show that I have not done my homework. Economists’ basic premise is that people are self-serving. Why should economists be any different. With a difficult to learn economic terminology, economists can create a monopoly position for themselves; they can restrict supply and increase price for their services. To quote the textbook, “people do what they do because it’s in their self interest.” Thus, the preponderance of the evidence suggests that economists have developed their economic jargon with their self-interest, not society’s interest, in mind.
I think the self serving reason why professions develop a separate terminology that only members can follow is more important because people are greedy and always want what is good for them, not what is good for society because of the problems of the barriers to entry and the free rider and thus, the self serving reason is more important. On the other hand, it is good for society if professions develop a separate terminology that only members can follow because then everyone can understand them, and they can understand each other. A common terminology permits effective interpersonal communication, thereby resulting in clear, complete, open dialogue. So in a way, the society-serving causes of professionals’ terminology outweigh the self-serving causes because if we didn’t have it, then we wouldn’t be able to understand the weighty and eloquent locutions spoken by the eminent economists of yesteryear and today.
For these reasons, I think that sometimes the society-serving reason is the most important. This the intellectual importance of the self-serving reason which is also the most important sometimes. The whole theory of the principle of rational choice theory which says that one should do that which yields the maximum marginal utility according to your self interest which is to say that selfishness is the thing that drives most people. Economists do not find it in their best selfish interest to use normal English to discuss economic theory because then everyone would be speaking it in the society, and the marginal utility is low. Instead of that, economists developed a terminology which only they could use, so people would have to attend institutions of higher learning to make it possible for them to profess economic tenets.
This is called barriers to entry because people are barred from entering the world of economics by the insurmountable difficulties in attaining a sufficiently acceptable level of proficiency in the economics terminology. Barriers to entry create monopolies, market structures in which one firm makes up the entire market. Three important barriers to entry are natural ability, increasing returns to scale, and government restrictions, economics terminology can’t really be considered any of these because it’s more similar to learning by doing.
Also the free rider problem undermines people’s willingness to perform service to their society further strengthening the argument that self-serving reasons have prompted economists to adopt their own terminology. Keeping people from becoming economists or talking about economics through the language barrier. This causes another dramatic consequence. The supply for economists is restricted, so that each economist who exists in the present market for economists may value their work at a higher price. So as you can see, the most important reason is the self-serving one, and subsequently, economists’ use of an economic terminology results in increased benefit to the economists at the expense of society. The society-serving reason pales in comparison.
A quick skim of The Wall Street Journal on a daily basis for just a week should prove to you that the Heisenberg principle does indeed apply to economics. The Wall Street Journal provides daily analyses of economic events and economists’ perspectives on what has happened as well as what is likely to happen. The Wall Street Journal ‘s curculation is evidence that these analyses are taken seriously by both businesspeople and consumers. To see how economists’ predictions change the course of economic events, look at economists’ assessment of leading and coincidental indicators and the subsequent movement up or down in the markets for stocks and bonds. Leading indicators are used to predict what is likely to happen in the future, while coincidental indicators are used to describe the economy’s current condition.
When the economists say that the indicators demonstrate that the economy is in a recession or entering a recession, consumers and businesses react immediately to prepare for the anticipated recession by reducing consumption and investing more cautiously. This often serves to hasten the onset of a recession, fullfilling the economists’ original prediction. In turn, if consumers and businesses expect good times ahead, they invest and spend their money more confidently. High levels of investment and consumption translate to strong economic growth. An examination of “Orders for Durable Goods Plunge by 6%,” [The Wall Street Journal, May 25, 1995] yields an example of how this cycle works. Note Marilyn Schaja’s prediction that the Fed will move toward “an easier policy stance” and the reaction of investors in the bond markets to this statement and others similar to it; the bond market soared due to speculation that interest rates might be cut soon.
This is only one example of how economists’ predictions directly affect the bond market, but the bond market rises and falls dramatically each day in response to speculation about what the Fed will do or whether the economy is predicted to speed up or slow down. Other examples abound on the second page of The Wall Street Journal. But economists are not gods. They cannot know for sure what is going to happen to the economy, and they often disagree with one another. When there is a majority consensus, the Heisenberg principle operates in full force. Businesses and consumers are often susceptible to the majority opinion, and economists’ predictions will likely be fulfilled just because the predictions have been made. When all economists seem to disagree, the individual is left to make his own decisions. In this case, the outcome is less predictable, and it might seem that the observed is less likely to be affected by the process of observation.
I don’t think the Hiesenberg principle can be relevent to economics because its a phisics principal. Phisics and economics are two different subjects, phisics being a natural science, and economics being a social science. I don’t think that economic predictions have anything to do with the events that they predict. The article compares economists to meteoroligists. Meterologists’ predictions don’t change the whether, so economists predictions don’t change the economy. This means that the Hieisenburg isn’t appliable.
Underlying economic reasoning is economists’ analysis of individual choice. That analysis is based upon the observation that, generally, people act according to their rational self-interest, trying to get as much pleasure as possible out of life. From this proposition and subsequent measurement of pleasure, comes economists’ basic principle of rational choice: spend your money on those goods that give you the most marginal utility per dollar. An economist would use this principle to assess whether or not Ms. Luhrs’s statement is rational. If Ms. Luhrs calculated the marginal utility per dollar of leisure to be greater than that of consumption of material goods, and thus, work, her statement would be assumed to be rational by economists.
The article, “When Shopping Sprees Pall, Some Seek the Simple Life,” [The Wall Street Journal, May 24, 19995] discusses that the decision is hers and that it has been made after careful thought. For example, Ms. Luhrs’s statement “It’s a freedom thing, the way I see it,” demonstrates the high value she gives to freedom, and the low value she gives to material goods. The fact that many people do not share her valuation of leisure versus material wealth is irrelevant to the issue. There is nothing in economics that says that people must want more and more material things. A second part of the principle of rational choice is the principle of diminishing marginal utility: as our consumption of an item increases, the marginal utility obtained from each unit decreases. It could be argued that Ms. Luhrs is demonstrating this principle: that after a certain point, work and consumption of material goods becomes less and less satisfying; the marginal utility of consumption of material goods falls.
No, it is not rational because according to the economic theory, you should spend your money on those goods which yield the maximum utility per dollar. MUx/Px must equal MUy/Py. If MUx/Px is less than MUy/Py, than it is the consumer’s duty to buy more of good Y. If MUy/Py is less than MUx/Px, than the consumer must use more of good X. When you work more, you can consume more, each additional unit yielding additional, marginal utility, so you continually increase the sum of your total utility. Following the tradition of economic reasoning, more is better. She may be right about that treadmill because there is a cycle in which consumption results from work which necessitates further consumption, but theory would indicate that this is a positive, self-perpetuating cycle because increased consumption yields increased utility, therefore maximizing utility.
The book says that the rule to follow is to vary consumption until the marginal utility for every dollar for one thing that you are consuming is the same as the marginal utility for every dollar for another thing that you are consuming. Ms. Luhr’s dissatisfaction from her current status in our society must come from her failure to vary her consumption of a variety of material goods. For goods, the marginal utility may start to be less than it was before after a while, and then we are advised to switch our buying to other goods. Ms. Luhr needs to find the goods which work for her.
Then she wouldn’t be talking about the negative aspects of work because it is work which allows her to consume and maximize her utility. Her utils are at their highest the more she consumes. In my view Ms. Luhr is succumbing to her emotions rather than her logic because everyone knows that increased work yields increased wealth and increased utility, and this is the ultimate goal of a rational person who is acting selfishly which is how economists think people act. If Ms. Luhr were truly being selfish and self-interested, she would obtain greater satisfaction from greater consumption, but her statement is defying this tenet of rationality which is so important to economic reasoning. She doesn’t want more. She must be irrational.