Dear ESSA members,
It has been an absolute privilege to have been your President over the past year. I am humbled by all your kind words at ESSA events, in the corridors of the Spot building, tutorials and lectures! I could not have hoped for a warmer welcome on campus for the Economics Student Society of Australia: thank you. It puts the biggest smile on my face to hear someone discuss how awesome an ESSA event was, or hearing from alumni that they wish ESSA was around when they were still studying.
We began as a group of friends wanting to disband the notion that economics is boring, irrelevant and offers no career prospects. That is SO far from the truth: studying economics opens a door to a myriad of opportunities and is applicable to every aspect of your life.
Every single day I see a bit of economics creep into my life, whether that be at the supermarket when I see empty shelves where the Tim Tams should have been (demand has clearly exceeded supply! Or maybe there was a shortage of supply?) to when I’m shopping and see almost exactly the same dress in a [cheap] Asian boutique and at Pilgrim, but at drastically different prices, $40 vs $140. (Think substitutability, brand name, elasticity of demand, quantity supplied…)
Not only does it pop up frequently in your daily life, Economics is a tool that can be used to help you make decisions. In fact, you’re probably applying it – you just haven’t realised it is Economics!
For example, I’m sure you’ve found yourself in this situation before:
Coffee catch up at Seven Seeds V.S Consult with your economics tutor
Obviously this is a pretty tough choice! On the one hand, who can resist a chilled catch up at Seven Seeds where you can gossip and unwind? On the other, you’re struggling with the introduction of technological change to the Solow Swan model – which you learnt 6 weeks ago but still haven’t mastered!
Subconsciously, you run through the pros and cons of going to hot chocolate, and forgoing the consult.
|Quality time with a friend||Fall further behind in Macro|
|Amazing coffee/hot chocolate/cupcake||Potentially fail mid semester|
|Learn some new gossip||Won’t be able to do assignment|
|Relax||Find it difficult to understand future lectures|
|The next tutor won’t be as free (the closer to exams, the more people go to consults!)|
Evidently, there are more negatives than positives to going for coffee. You have just successfully undertaken a cost-benefit analysis! Up top, high five! But that’s not all!
As an individual, you have also recognised the concepts of “scarcity” and “opportunity cost”. Obviously if time permitted, you’d love to go to both, but you can’t because you have limited time! Sadly, you have to make a choice between the two, therefore, in doing so, you’re allocating your resource (time) to one use over another. In its most basic form you have just experienced the fundamental economics problem of scarcity and opportunity cost.
So, it seems like your decision should be pretty obvious: you should go to the consult because the benefits outweigh the costs. However, in doing so, there’s the implicit assumption that you’re rational.
And this leads us to probably one of the biggest flaws in economics, or largely taken for granted anyway: to come to a conclusion, we make assumptions.
Some of the assumptions we’ve made are:
- Your friend isn’t free at any other time
- There are no other consults you can attend
- There is a mid-semester test coming up
- Economics lectures aren’t independent of each other
- There are diminishing marginal returns to consultations as exams draw close
- Can you come up with anymore?
So next time you see some newspaper article criticising an economics model for being too abstract from real life, remember that models are made to help us understand the fundamentals of how a problem works. It makes no claim to taking every single detail into account!
In fact, our little analysis here is actually a lot more complicated as we haven’t taken into account things like:
- Utility maximising
- Dynamic games/Time periods (Could you catch up for coffee an hour later?)
Maybe for another article… I’m running low on word count! (See?! Scarcity again!)
The Economics Student Society of Australia was born from a pure love of economics and its applications to everyday life. If the above analysis is any indication; I think it’s quite obvious I use it excessively.
Looking back to where we began, what we wanted to achieve and comparing that to where we are now, ESSA has travelled so far and we still have so much to offer. A big thank you to our Founding Committee and 2012 committee for their dedication in establishing ESSA, it has been truly incredible and we wouldn’t be standing without you!
This is only just the beginning of an incredible journey! I hope you’ll keep supporting us by coming to our events and visiting our website!
Thank you all for your incredible support throughout the year! It has been overwhelming and I know ESSA will be safe in the hands of the 2013 committee led by Dean and Theo at Melbourne, and Matt and Sam at Monash. [Hopefully we’ll be adding other Universities to this list…!]
Good luck for your upcoming exams and congratulations to my fellow 2012 Graduates!