040689 SE IM/KFK PÖ: International Personnel Management (2008W)

"Thinking economics!"

In his book "The Armchair Economist" (1996, p. vii), Steven Landsburg describes the essence of economic thinking as follows: "First, it is about observing the world with genuine curiosity and admitting that it is full of mysteries. Second, it is about trying to solve those mysteries in ways that are consistent with the general proposition that human behavior is usually designed to serve a purpose". First as a doctorate student, later as a professor, I have been privileged to enjoy conversations and discussions with many extremely bright and adorably analytic-minded economists, my colleagues, who take every opportunity (everyday lunches, after-research-seminar dinners, conference receptions, birthday parties, and the like occasions) to employ their economic wit on virtually every facet of social life. Typically, somebody in this group brings up a puzzling interpretation of an everyday occurrence or a story currently making the news which then regularly spins off into vivid disputes. Obviously, there is one (rather, at least one since it is allowed to change one's mind) opinion per economist around. Interestingly, every such opinion is downright "economical" in nature and contributes still another, even more original and brilliant, explanation.

Unfortunately, this "economics spirit" does not always carry over to discussions with my students. Faced with the same everyday riddles and puzzles, many tend to refer to just about every other explanation put forth in the media - being evasive, to say the least, in letting their trained economists' intuitions speak up. As if it were a matter of "political correctness", they leave issues such as the effects of law, crime, terrorism, discrimination, and corruption on our lives, questions of how to organize schools and education, whether or not to invest into nuclear power, how to allocate the costs of our health system, even who earns what and for which reason on every coffee sold in the "cafeteria" (as long as it is "fair"), not even speaking of the decision whom to marry and how to name their children (a problem that most of them will have to face in the near future) to be addressed and answered by non-economists. To be precise on this point, I perfectly understand that complex social problems require an interdisciplinary approach to arrive at solutions. But - and now I am addressing my potential graduates directly - you are not contributing anything to finding these solutions if you (whether explicitly asked for your opinion or simply being curious about the world around you) decide not apply what you have learnt.

Last semester's (summer term 2008) seminar was devoted to work that applies non-economic arguments to standard economic problems of decision-making. During this semester's seminar we will therefore attempt to just do the reverse. Hence, let us strictly "think economics" - but when discussing "our" real world out there. For the moment, forget about the potential movements of interest rates, the outlook on our macro-economy's development, or globalization and the effects on labor markets - although we can all agree that knowledge of only some partial solution to such serious economic matters could make you incredibly rich (or, else, if becoming rich does not work so well, you could still run for a political mandate). Instead, let us follow the (much too big) footsteps of George Akerlof who received the Nobel Prize for explaining why you are likely to buy a used car which is not worth the price you paid for it. Thus, we will test our economic intuition and, hopefully, enjoy interesting discussions on topics which (I am sure) have long bothered you.