Why Study Economics? Some Practical Reasons

Economics is everywhere. It is as ubiquitous as mathematics or physics. Yet, many don’t have a good idea of what Economics is or how it is useful.

The computer that you are reading this on was once just an idea. Someone acted upon that idea to bring it into a reality through a process of capital accumulation and production and then brought it into a market for someone (hopefully) to purchase it and compensate the entrepreneur for his risk and effort.

This simple example is rife with economics, and economics students will begin to see why.

On the surface, economics helps people understand markets – where they come from and how they work. The entrepreneur assesses the general public’s needs and wants and acts according to begin the process of producing a good or service that meets these needs and wants. But there is a risk involved: what if the preferences change in the midst of production 0r he completely misjudges the public’s preferences in the first place? The producer is out of luck and is at a loss. Profit rewards those entrepreneurs/producers who create things that people want and what people need. Losses punish those who do not create what people want and need. Profit is the driving motive to create and thus increase our standard of living.

This has enormous policy implications. Economists acquire indispensable tools to analyze policies that (again, hopefully) increase our standard of living and well-being.

So studying economics allows students to analyze and create policies to promote growth and continual increases in productivity. But economics can be used for much more practical reasons as well. According to Hal Varian, chief Economist at Google, data analysis is a rapidly growing field which will draw the kinds of graduates that were planning on going into quantitative financial fields. There is so much information out there in markets, but it takes someone who can accurately and efficiently analyze and interpret that data to run a profitable business. A good understanding of economics and econometrics will prepare students very well for careers in analysis fields such as this.

Along the same lines, economics majors are often well-suited to be part of planning teams for firms in order to forecast revenues and demand in the future. These analyses can help the planning process ahead of time so that current funds and capital can be moved around or invested to make the most profit. This is a very desirable skill. Economics majors can be great fits.

How do you prepare now for careers in such places?

-Learn Econometrics; it is an indispensable tool for economists and it the way applied economics is done outside of the classroom.

-Become comfortable with math, especially Calculus; along with making your résumé look better, math classes train the mind how to approach and solve difficult problems. Again, this is indispensable; it is how theoretical economics is done and helps enormously with econometrical analysis. Mathematical Economics is a great economics elective to take to help with this.

-Learn about Time Series analysis; find out where Applied Time Series is being taught and take the class. If you want to learn how to forecast, you need to learn Time Series.

Steven

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One thought on “Why Study Economics? Some Practical Reasons

  1. I’ve heard from many professionals that someone with a combination of economics/finance and technology is becoming very valuable. Google and other tech firms have made data gathering sooooo easy, now they just need someone to analyze that info. If I were still in school I’d do an Econ major with a Math/statistics/computer science minor.

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