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Tuesday
Oct232012

Economics for five-year-olds

My neighbour’s daughter asked what my job was. “I’m an economist,” I replied.
“What’s that?”

Normally I tell people that economists think about cost and benefits; the demand and supply of goods and services. I tell them we want to maximise ‘utility’, but since we can’t measure it directly or ask people, we watch what people do instead (e.g. in markets) and use prices (money) as a proxy for utility.

From there, I explain that my field – environmental economics – is about valuing things that don’t have markets, e.g. the environment. If they’re really paying attention, I may even talk about externalities.

My neighbour’s daughter, however, is five. She doesn’t understand markets, or utility, or costs and benefits in an abstract sense. So I was stumped.

Months later, I’ve got a good answer:

An economist figures out how to share things so that everyone can be as happy as possible.

You’re welcome.

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