economics in our daily life essay

Applying economics in everyday life

At the start of the academic year, I always feel a little pressure to justify the study of economics. Students come up asking things like, should they do economics or history? It’s hard to know what to say, but to get people excited about economics it’s good to try and think how economics can be applied in everyday life. Some of this is just common sense, but economics can help put a theory behind our everyday actions.

Buying goods which give the highest satisfaction for the price

This is common sense, but in economics, we give it the term of marginal utility theory. The idea is that a rational person will be evaluating how much utility (satisfaction) goods and services give him compared to the price. To maximise your overall welfare, you will consume a quantity of goods where total utility is maximised given your budget. For example, is it worth paying extra charges by airlines, such as paying for more leg-room? Or pay to get priority boarding? Economics suggests we need to evaluate the marginal benefit of these services compared to the marginal cost. See: Extra charges by airlines

Sunk cost fallacy

A sunk cost is an irretrievable cost, something we cannot get back. For example, suppose we sign up for a gym membership at $40 a month for a whole year. We are committed to paying $480, whether we go or not. If we are feeling unwell, should we go to the gym to get our money’s worth or should we write off the sunk cost and maximise our marginal utility for that particular day? See: sunk cost fallacy

Opportunity Cost

The first lesson of economics is the issue of scarcity and limited resources. If we use our limited budget for buying one type of good (food), there is an opportunity cost – we cannot spend that money on other goods such as entertainment. Opportunity cost is an intrinsic aspect of most economic choices. We may like the idea of lower income tax, but there will be an opportunity cost – in this case, less government revenue to spend on health care and education.

There’s no such thing as free parking

Another example of opportunity cost – no one likes to pay for parking, but would we be better off if parking was free? Most likely not. If parking was free, demand might be greater than supply causing people to waste time driving around looking for a parking spot. Free parking would also encourage people to drive into city centres rather than use more environmentally friendly forms of transport. The result would be that free parking would increase congestion; therefore although we would pay less for parking, we would face other indirect costs. (time wasted)

Behavioural economics and bias

Traditional economic theory assumes that man is rational. However, the work of behavioural economics suggests we can be prone to bias and irrational behaviour. For example, we may be prone to a present bias where we overvalue pleasure in the short-term and ignore long-term implications. For example, consuming demerit goods like alcohol or not saving sufficiently for retirement. The insight of present bias suggests we make decisions our future self would not make. If we become aware of these bias and irrational behaviour, then we can make better decisions which improve our long-term welfare.

See: Behavioural economics

Irrational exuberance

Another issue in behavioural economics is that of irrational exuberance or when we get carried away by an asset bubble. Can we be sure we will not get carried away by a boom and bubble? History suggests that many investors are over-optimistic about their ability to leave the market at the optimal time and can feel that this time is different.

See: Irrational exuberance

On the other hand

In economics, there’s always another way of looking at the world. Borrowing is bad, except when it isn’t. Nothing is black and white in economics; it depends. For example, government borrowing to finance pensions for an ageing population can lead to an unsustainable rise in government debt. However, government borrowing during a recession can help the economy recover.

Diminishing returns

If we like chocolate cake, why do we not eat three per day? The reason is diminishing returns. The first chocolate cake may give us 10/10. The second cake 3/10. The third cake may make us sick and give a negative utility. People may have different opinions about when diminishing returns set in. Some students may feel this is after the second pint, other students only after considerably more. There are also diminishing returns to money. That is why we don’t spend all our time working – extra money gives increasingly less satisfaction and reduces leisure time

DIminishing returns to wealth/income

A similar concept is that of diminishing returns to wealth and income. Does an extra $100 give us more utility? Yes, but it depends on our current income. If we have a very low salary, the extra $100 will make a big difference. But, if we earn $100,000 a year, we may not notice that extra $100 a year. The importance of this is for choosing the right balance between work and leisure. What is the value in working a long working week, if the extra money earnt has a limited marginal utility?

Externalities

Economics may feel we are promoting selfish ends – firms maximise profits, consumers maximise their personal utility. Adam Smith claimed pursuing selfish goals ended up in improving the greater good. But, in economics, we also try to consider the impact of our actions on other people. If a firm produces chemicals, it may make a profit, but cause an external cost of pollution. To ignore this external cost would be to create an inefficient outcome. We should make the firm pay the cost of its pollution so that it has the incentive to minimise or halt external costs. Externalities are everywhere. Even your decision to study economics could have positive externalities in the future. For example, you could end up being an economics teacher helping others learn all about economics.

Public goods not provided by the free market .

The free market has many advantages. Private firms tend to be more efficient, innovative and respond to consumer preferences. However, many goods and services would either be not provided or under-provided in a free market. Public goods like street lighting and law and order. Also, public services like health care and education would be provided in insufficient quantities. Therefore, to optimise social welfare there is a need for government intervention through taxes and direct public provision. We may dislike taxes, but we would dislike not being able to see a doctor.

Should I worry about automation and new technology?

There are concerns that new technology and automation will lead to job losses and some people losing out. If our job is threatened by new technology is the fear justified? Economic analysis suggests there it is a fallacy that new technology leads to permanent job losses. This is known as the Luddite Fallacy – though some jobs are lost, new ones are created. Automation and new technology are not guaranteed to make everyone better off – especially in the short term. See: Pros and cons of automation

Macroeconomics affects everyone

Everyone is affected in some way by macroeconomic issues such as inflation and unemployment. Inflation can reduce the value of your savings. If you keep cash under your bed during high inflation, you’d be better off trying to buy gold or some physical assets. Mass unemployment can cause society to fragment, therefore there is a need to adopt policies to try and reduce unemployment.

Life-cycle hypothesis

The Life Cycle Hypothesis states that to maximise lifetime utility, we should try to smooth our consumption patterns over the course of our life. It is not good to have substantial income when we are old and unable to move. Spending some money in our student years will give greater overall utility. This justifies taking out a student loan to pay back when we are working and then saving for a pension in our retirement.

Examples of economics in everyday life

Is the price of Starbucks a rip-off?
Is it rational to put money in an honesty box?
How will you be affected by a devaluation of the Pound?
How will you be affected by low-interest rates?
How will you be affected by a recession?
10 reasons to study economics

Last updated: 10th November 2021, Tejvan Pettinger , www.economicshelp.org, Oxford, UK

11 thoughts on “Applying economics in everyday life”

Very nice article especially to beginners (students). It’s easily understandable.

interesting

Great, i like economics, its interesting and fascinating.

THEN BATTER THINKS TO DEVLOPMENT A APPLICATION ON PREFROM A APPLICATION TO ECONOMICALS THINKS IN HUMAN ON UNDER CONNECTION IN HUMAN THINKS

concepts are very clear and nite becouse initially importance of economics..

Very easily explained.Make more like these.

make a poem about economics using many different economic topics and email it back to me please its for an economics project !!!

Being an economics student ,it is Very informative for me ….

Very comprehensive thoughts. The application of both micro and macro economics in daily life is lot yet people don’t realize. For example , when you go to mall to purchase your daily needs or other products, you simply calculate opportunity cost between two products. And as a rationale consumer select one product over other who’s marginal value is more. Soon meet you with more such concepts

I like this. I really helps me as I have to constantly explain these concepts everyday. It’s just nice to know others feel the same.

Quote inspiring. Our everyday application of Economics concepts are enormously. We always use public roads ,streetlights, sewer lines and public security. We also complain about those not using them well without knowing that once these goods and services are provides, we can not stop others from using it, neither can the consumption by others reduce the quantity available for our consumption.

Comments are closed.

The Classroom | Empowering Students in Their College Journey

How Does Economics Affect Our Daily Lives?

What Are the Causes of Economic Decline?

While the word "economics" may conjure up a view of Wall Street trading or a college course, it is actually a term that relates to everyday life in many ways. Economics is a social science that deals with the life-cycle of goods and services. It is a study of how innovation and finance revolve around the basic human needs and wants in order to provide products and services to the public. Understanding how economics relates to society is critical to business success but also relates everyday life. Consumers confident in the economy are more likely to spend while a shaky economy may be matched with consumers less willing to spend money. Taking a closer look at supply and cost, consumer loans, consumer confidence and debt and spending helps analyze the overall economic climate and outlook.

Supply and Cost

Economics has an enormous effect on the daily lives and wallets of all people, even if they aren't actually involved in economic studies. The principles of supply and demand play out every day for people making purchasing decisions on goods and services as well as in them keeping or finding employment. Changes in circumstances, regulations or government mandates on any part of an industry's economic structure can create a ripple effect of price changes through multiple industries to the end consumer. For example, if regulations change distribution channels, that can increase the cost of producing goods which in turn, forces retailers to raise the price of goods to still have an economic profit.

Consumer Confidence

When the consumers' confidence in the economy is low, they restrain spending, starting with dining out and going to the movies. These industries have wage workers that lose income when hours are cut due to reduced business. Soon, everyone feels the pinch perpetuated by fewer open retail check-out lines to fewer police on the streets. The Gallup Consumer Confidence poll measures ongoing consumer economic confidence by asking Americans to answer questions on their view of current economic conditions and if they think conditions are improving or declining from a point in the recent past.

Debt and Spending

CNN Money reports that consumer spending fuels two-thirds of the United States economic activity, much of which was based on credit prior to 2008. The 2008 to 2009 financial collapse led banks to tighten consumer lending, and consumers began paying down debt rather then spending as usual. Reducing personal debt is good on the individual level, but this reaction also kept employment in a slump and reduced the disposable income of households and individuals. When individuals see the economy as being stronger, they are more apt to spend money in stores and on larger purchases like homes or vehicles. Debt often comes with those purchases beyond day-to-day spending. When consumers return to feeling the economy is rebounding, they are apt to take on more debt with less fear of an economic collapse.

Cons of Supply Side Economics

Managerial Economics Topics

Negative Effects of Tariffs

Macroeconomic Paper Research Topics

Topics for A Human Relations Research Paper

Difference Between Deflation, Recession & Depression

How to Calculate Total Cost in Economics

Advantages & Disadvantages on College Students With Credit Cards

CNNMoney: Consumer Confidence Ticks up in October (2010)
RasmussenReports: Discover ® Consumer Spending Monitor (SM) Rises 1.8 Points in October
BusinessInsider: The New American Consumer is Terrified of Debt Even as the Economy Grows
Economics Help: Applying Economics in Everyday Life
Gallup: U.S. Economic Confidence Index

Cynthia Clark began writing professionally in 2004. Her work experience includes all areas of small-business development, real-estate investments, home remodeling and Web development. Clark is skilled in a number of design disciplines from digital graphics to interior design. Her diverse background and commonsense problem-solving skills allow her to tackle a variety of topics as an online writer.

Saturday, June 17, 2017

The importance of economics.

What to produce? - Is it worth spending more on health care?
How to produce? - Should we leave it to market forces or implement government regulations.
For whom to produce? - How should we distribute resources, should we place higher income tax on the wealthiest in society?

Mass unemployment in the 1930s

Policies to reduce unemployment
Policies to reduce inflation

Market failure - stuck in traffic jam, breathing car fumes

The over production of negative externalities (e.g. pollution/congestion)
The underproduction of goods with positive externalities (e.g. education, health care, public transport).
Non-provision of Public Goods - (national defence, law and order)
Tax negative externalities
Subsidise public services like health care and education.
Carbon Tax - should we implement a carbon tax to reduce global warming?
Should we tax fatty foods?
Efficiency v equality
GDP and Happiness
Economics - The Dismal Science
How to deal/combat global warming?
Does globalisation help or hinder developing countries?
How to live in a society without oil?

15 comments:

a big hand of appluse for the writer of da topic who made it so easy to understand and absorbant. Mrs.Afaque...

this helped me a lot in my school project.a bit problem is there a filipino version?haha!

I really like the blog because of easy and focused approach that writer has used in simple and less words. Useful for those who just want a overview about economics.

very helpful and briefly detailed..thank you, writer.

this will help me 4 sure.. jejeje

your notes really helped me alot. i have my exam tomorrow and and i easily mugged up these notes.

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thanks a lot to the writer...you just saved me from my prof's course.

Please elaborate on GDP Vs. Happiness?

Economics helps me to manage my money well when in school. thank you writer!

I will like to know how an economist is useful in an electoral decision or organization

I love the blog because the writer explained the importance of economics in simple terms and it helped me a lot with my school assignment

A definition of what an economy means is helpful in understanding the importance of economic systems. The economy is a structured system that uses production, distribution, and services to create a stable environment. Therefore, an economic system is the production, consumption of goods and services with a set of institutions and social relations to create a balanced society. There are a few different types of economic systems such as capitalist, social list, mixed economies and communism. Economic systems do not have to be on a global scale or even a national scale. For example, economic systems such as distributism, the Japanese system, social market economy and Georgism are some of the available options out there. These systems may be state or private. A few are cooperative ownerships. A mixed economy is considered one with a mix of private activity and state planning. The best gauge for the importance of economic systems is balance. The world requires a balance that will ensure the survival of the system. For example, the human race has to find balance with food, shelter, water, and even income in order to survive. Income is necessary in order to buy shelter, food, and other necessities of life. Though money did not exist in the past, we have an economic system that demands income be included in our survival. The UK has a capitalist system which the government maintains order to sustain life in the UK. Since society can be part of economic systems, it is also an important factor in people getting along in a balance of nature. Humans are social by nature therefore an economy that promotes this social interaction will also increase the effectiveness of the economic system in place and the balance of one's life.

thanks man! this helps me for my report tomorrow..

Very easy to understand Thanks

Economics in Everyday Life

Kevin corcoran .pp-multiple-authors-boxes-wrapper.box-post-id-69046.pp-multiple-authors-layout-inline.multiple-authors-target-shortcode.box-instance-id-1 .pp-author-boxes-avatar img { width: 80px important; height: 80px important; } .pp-multiple-authors-boxes-wrapper.box-post-id-69046.pp-multiple-authors-layout-inline.multiple-authors-target-shortcode.box-instance-id-1 .pp-author-boxes-avatar img { border-radius: 50% important; } .pp-multiple-authors-boxes-wrapper.box-post-id-69046.pp-multiple-authors-layout-inline.multiple-authors-target-shortcode.box-instance-id-1 .pp-author-boxes-meta a { background-color: #655997 important; } .pp-multiple-authors-boxes-wrapper.box-post-id-69046.pp-multiple-authors-layout-inline.multiple-authors-target-shortcode.box-instance-id-1 .pp-author-boxes-meta a { color: #ffffff important; } .pp-multiple-authors-boxes-wrapper.box-post-id-69046.pp-multiple-authors-layout-inline.multiple-authors-target-shortcode.box-instance-id-1 .pp-author-boxes-meta a:hover { color: #ffffff important; } .pp-multiple-authors-boxes-wrapper.box-post-id-69046.pp-multiple-authors-layout-inline.multiple-authors-target-shortcode.box-instance-id-1 .pp-author-boxes-recent-posts-title { border-bottom-style: dotted important; } .pp-multiple-authors-boxes-wrapper.box-post-id-69046.pp-multiple-authors-layout-inline.multiple-authors-target-shortcode.box-instance-id-1 .pp-author-boxes-recent-posts-item { text-align: left important; } .pp-multiple-authors-boxes-wrapper.box-post-id-69046.pp-multiple-authors-layout-inline.multiple-authors-target-shortcode.box-instance-id-1 .pp-multiple-authors-boxes-li { border-style: none important; } .pp-multiple-authors-boxes-wrapper.box-post-id-69046.pp-multiple-authors-layout-inline.multiple-authors-target-shortcode.box-instance-id-1 .pp-multiple-authors-boxes-li { color: #3c434a important; } .pp-multiple-authors-boxes-wrapper.box-post-id-69046.pp-multiple-authors-layout-inline.multiple-authors-target-shortcode.box-instance-id-1 .pp-multiple-authors-boxes-li { border-radius: px important; } .pp-multiple-authors-layout-inline ul.pp-multiple-authors-boxes-ul { display: flex; } .pp-multiple-authors-layout-inline ul.pp-multiple-authors-boxes-ul li { margin-right: 10px }.pp-multiple-authors-boxes-wrapper.pp-multiple-authors-wrapper.pp-multiple-authors-layout-inline.multiple-authors-target-shortcode.box-post-id-69046.box-instance-id-1.ppma_boxes_69046 ul li > div:nth-child(1) {flex: 1 important;}.

By Kevin Corcoran, Nov 22 2023

There are many ways to learn the ideas of economics. One way is through the standard method – read textbooks or attend lectures where ideas are described. But economics is about human action – which means the lessons of economics can also be found in our own lives. Some people claim that basic econ is often counterintuitive, and it indeed may be to some or most people. But as I began to study economics many years ago, I found its lessons extremely intuitive, because the ideas being described were things I had witnessed or experienced throughout my life.

For example, I found it very easy to envision all the ways people adjust their behavior in response to taxes. I grew up in Washington state, very close to the border with Oregon. There were two big tax differences between those states. (Well, probably more than two, but there were two I cared about at that time.) Oregon had a state income tax, while Washington did not. And Washington had a state sales tax, while Oregon did not.

Both of those were often cited as factors in decisions people would make. As people started getting jobs, it was common to find opportunities that were similarly appealing and equidistant, some in Washington and some just over the river in Oregon. When that happened, people would heavily favor finding a job in Washington, because if you worked in Oregon you had to pay Oregon state income tax, even if you weren’t an Oregon resident. (But even though you were an Oregon taxpayer, you were unable to cast any votes in Oregon – taxation without representation!) But it didn’t work in the other direction – friends I had in Portland didn’t feel any extra incentive to find a Washington job, because even if they worked in Washington, they would still have to pay Oregon state income tax.

However, the sales tax difference made a much more frequent impact. Washington’s sales tax in those days was, if memory serves, around 7.7%. This made it very common for people in Washington to put a little extra effort into driving to Oregon to make a purchase, particularly if it was a large purchase. If you needed to buy a new TV or a new couch, why would you voluntarily choose to pay what amounted to an unnecessary 7.7% surcharge on top of your already expensive purchase? I’m sure that over the years, retailers along the border in Washington lost a considerable number of sales to retailers just along the Oregon border, precisely because people would adjust their behavior in response to taxes.

But at the same time, the sales tax issue wasn’t decisive . If you were going to buy a new TV for a thousand dollars, if often made sense to take the extra ten minutes to drive over the Columbia River and buy it in Oregon to save nearly eighty dollars in sales tax. But if you just needed to make a small purchase, the extra time and gas costs of the longer drive meant it wasn’t worth doing to avoid the 7.7% tax rate. And the further you lived from the Oregon border, the larger a purchase would have to be in order to make you willing to do the longer drive in order to save on sales tax. Though I didn’t know the term at the time, this showed me the importance of transaction costs in our decision making. The choice you will make will be in part influenced by the fact that the choice itself carries its own cost.

One other difference between Oregon and Washington gave me a healthy skepticism of “but it creates jobs!” as a justification for some program or regulation . While I lived in the area, and until very recently, it was illegal for you to pump your own gas in Oregon. By law, you would have to hand your cash or credit card to a gas station employee and have him pump your gas for you. I absolutely hated the experience, because it just slowed the whole process down. It was very common to get to a gas station with eight pumps and only two attendants and have to wait several minutes for one to work his way over to you, tell him you wanted to fill the tank, hand him your card, and have him start filling your tank. Meanwhile he’d wander off to another vehicle, your car would finish filling up, and you’d still be left waiting several more minutes before he got back and put the nozzle away and returned your credit card so you could be on your way. Nothing was more productive as a result of these jobs existing – the whole process just became slower and more time consuming. This made it very intuitive for me to see why economists focus on production, not employment. It’s not about how many people are doing stuff, what really matters is how much stuff gets done . Using more people to achieve the same level of production (or less) isn’t how progress is made.

What about you, EconLog readers? Are there any ideas in economics you learned about and immediately recognized from your own life experience? If so, drop some comments sharing what those ideas where, and where in life you saw them in action.

Richard Fulmer

Nov 22 2023 at 12:26pm.

In the U.S. no one haggles over the price of a can of beans or a bag of rice. The pennies we might save aren’t worth the time or the effort. But I’ve been to countries in which people are so poor that a few pennies mean a lot and they do haggle over such things. Here, most of us will still bargain over the price of a house or a car because a few hundred or a few thousand dollars are material to us. However, as we’ve become wealthier, car dealers advertising “no dicker stickers” are becoming more popular.

David Henderson

Nov 22 2023 at 2:22pm.

Nicely done.

I was pondering this on my way to work this morning. I might do a whole blog post on this but this is my quick recollection.

One of the things that most economists, including me, believe is that pay is based on the value of one’s output. On the way to work this morning, I heard a song on my FM channel by a young woman complaining that she was underpaid. I realized how often I hear that. Then my next thought was that even when I was in my teens and working in part-time jobs, I always understood that pay was based on productivity. I never told myself I was underpaid. I would then figure out how to be more productive in a job or, more likely, because job performance was constrained in some ways, how to find a job in which I would be more productive.

Ahmed Fares

Nov 22 2023 at 3:27pm.

“Most of economics can be summarized in four words: “People respond to incentives.” The rest is commentary.” — Steven E. Landsburg, The Armchair Economist

Nov 22 2023 at 5:31pm

Echoing above I would say that both my reading and managing have hit home that incentives matter, with the corollary that it’s not always obvious which incentives are important. There have been times when I misread incentives and times when I asked and people lied to me, so figuring them out is important. Dave mentions compensation and I think he is sort of right but at least in my profession it is also heavily driven by market conditions, basic supply and demand. Output of my midlevels, eg, has increased slightly over the last 20 years but pay has varied pretty widely depending upon local market conditions.

Also on compensation, I remain surprised at how few people understand the concept of total compensation and remain fixated only on salary. Individual financial needs vary so occasionally someone tells me they need the take home and dont care about the retirement plan and other benefits but lots of people dont seem to be able to grasp the idea even after an explanation and bypass much better total compensation to get a small amount of extra salary.

Nov 23 2023 at 11:27am

Today is a good day to talk about complimentary goods. Turkey and dressing, mashed potatoes and gravy, green beans with bacon, bread and butter, whipped cream on pumpkin pie. There are no substitutes…

Happy Thanksgiving!

Creigh Gordon

Nov 24 2023 at 1:06pm.

The real cost of anything is what you have to give up in order to get it.

Applies to leisure/retirement as well as everything else.

Aysha Ayyoob

Nov 25 2023 at 2:15am.

The economics concept which is most relatable to me was relationship between marginal and total productivity in real life .

Law of variable proportion also known as short run production law helps us to envision how high amount of labour in a sector(eg.farmland,factory unit) can lead to decrease in productivity.For eg,If 2 labours are required to operate a machine ,both the labours will work at full capacity and produce an output of 100 units(50 each).suppose two more labours are employed to operate the same machine in the night shift ,then productivity increases to 100 units (total 200 units) but if two more labour are employed for the sake of employment in the morning shift, where already two labours are working ,will reduce productivity and labours will work less than their potential ,therefore TP may increase but MP declines.

Reduction MP is beacuse of many reasons such as- overcrowding→talks and gossiping among the workers →demand to raise wage →low productivity.

I hope it was helpful.

Nov 25 2023 at 3:41pm

The following is a comment from “Economics StackExchange” about the Cobb-Douglas production function:

If one reads the original article by Cobb and Douglas (1928), one will find at the end of page 152 that the authors stress that they took into account two properties that had been theoretically discussed in the past: 1: That production exhibits constant returns to scale, meaning that doubling all inputs will double output. 2: That both production inputs are necessary for production, so output should be zero when either one is zero. To satisfy the 2nd property, they chose the multiplicative form. Given this, to satisfy the first property they had to make the sum of the exponents equal unity, so $a$, and $1-a$. We have $0<a<1$ so that output responds positively to each output. The existence of the constant $A$ in $Q = AK^aL^{1-a}$ takes care of two things: any “units of measurement” issues but also, the average of any other forces that may contribute to output.

A link to the Cobb-Douglas production function article mentioned above (opens in a pdf file):

https://www.aeaweb.org/aer/top20/18.1.139-165.pdf

Grand Rapids Mike

Nov 27 2023 at 9:08am.

Another contrast showing the effect of differences in taxes and regulation between states can be seen by examining the economic condition of the border cities of Illinois and Iowa. Specifically the Quad Cites area, with Rock Island and Moline on the Illinois side and Davenport and Bettendorf on the Iowa side. The Iowa side cities in this area are thriving the Illinois cities not so much.

Comments are closed.

How Much Does $100 Billion in Federal Spending Cos...

David henderson .pp-multiple-authors-boxes-wrapper.box-post-id-69046.pp-multiple-authors-layout-inline.multiple-authors-target-shortcode.box-instance-id-1 .pp-author-boxes-avatar img { width: 80px important; height: 80px important; } .pp-multiple-authors-boxes-wrapper.box-post-id-69046.pp-multiple-authors-layout-inline.multiple-authors-target-shortcode.box-instance-id-1 .pp-author-boxes-avatar img { border-radius: 50% important; } .pp-multiple-authors-boxes-wrapper.box-post-id-69046.pp-multiple-authors-layout-inline.multiple-authors-target-shortcode.box-instance-id-1 .pp-author-boxes-meta a { background-color: #655997 important; } .pp-multiple-authors-boxes-wrapper.box-post-id-69046.pp-multiple-authors-layout-inline.multiple-authors-target-shortcode.box-instance-id-1 .pp-author-boxes-meta a { color: #ffffff important; } .pp-multiple-authors-boxes-wrapper.box-post-id-69046.pp-multiple-authors-layout-inline.multiple-authors-target-shortcode.box-instance-id-1 .pp-author-boxes-meta a:hover { color: #ffffff important; } .pp-multiple-authors-boxes-wrapper.box-post-id-69046.pp-multiple-authors-layout-inline.multiple-authors-target-shortcode.box-instance-id-1 .pp-author-boxes-recent-posts-title { border-bottom-style: dotted important; } .pp-multiple-authors-boxes-wrapper.box-post-id-69046.pp-multiple-authors-layout-inline.multiple-authors-target-shortcode.box-instance-id-1 .pp-author-boxes-recent-posts-item { text-align: left important; } .pp-multiple-authors-boxes-wrapper.box-post-id-69046.pp-multiple-authors-layout-inline.multiple-authors-target-shortcode.box-instance-id-1 .pp-multiple-authors-boxes-li { border-style: none important; } .pp-multiple-authors-boxes-wrapper.box-post-id-69046.pp-multiple-authors-layout-inline.multiple-authors-target-shortcode.box-instance-id-1 .pp-multiple-authors-boxes-li { color: #3c434a important; } .pp-multiple-authors-boxes-wrapper.box-post-id-69046.pp-multiple-authors-layout-inline.multiple-authors-target-shortcode.box-instance-id-1 .pp-multiple-authors-boxes-li { border-radius: px important; } .pp-multiple-authors-layout-inline ul.pp-multiple-authors-boxes-ul { display: flex; } .pp-multiple-authors-layout-inline ul.pp-multiple-authors-boxes-ul li { margin-right: 10px }.pp-multiple-authors-boxes-wrapper.pp-multiple-authors-wrapper.pp-multiple-authors-layout-inline.multiple-authors-target-shortcode.box-post-id-69046.box-instance-id-1.ppma_boxes_69046 ul li > div:nth-child(1) {flex: 1 important;}.

George Shultz, secretary of state in the early 1980s, was also a first-rate economist. As a good economist, he put out a press release showing how little the average taxpaying household paid for aid to El Salvador. As I recall, it was about $34. (I can’t find a source.) Shultz seemed to think that $34 was a small num...

Essay on Economics Importance In Daily Life

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Understanding economics.

Economics is a subject that studies how people, businesses, and governments make choices about how to use resources. It’s like a guidebook for making decisions. It’s not just about money, but also about time, effort, and what you give up when you make a choice.

Economics in Daily Life

Every day, we make choices based on economics. When you decide to buy a toy with your pocket money, you’re using economic thinking. You’re choosing what you value most. You’re also considering what you’re giving up – maybe another toy or a candy bar.

Importance of Economics

Understanding economics helps us make better choices. It helps us decide how to use our resources wisely. It also helps us understand the world around us. For example, why are some things more expensive than others? Economics can help answer that.

Economics and Future

Economics also helps us plan for the future. It helps us understand how to save and invest money. It helps us understand how the economy works. This knowledge can help us make smart choices about jobs, education, and more.

250 Words Essay on Economics Importance In Daily Life

What is economics, personal economics.

Every day, we make decisions about what to buy, where to buy, and how much to spend. We also think about saving money for future needs. This is personal economics. We have to choose how to use our money wisely.

Economics in Business

Businesses also use economics. They decide what products to make, how many to produce, and at what price to sell them. They look at the demand for their products and the cost of making them. This helps them make profits and stay in business.

Economics in Society

Economics also plays a big role in society. It helps governments decide how to use their money. They have to choose what services to provide, like schools, hospitals, and roads. They also have to decide how to pay for these services, usually through taxes.

So, economics is very important in our daily lives. It helps us, businesses, and governments make important decisions. Understanding economics can help us make better choices and understand the world around us. So, even if you’re a student, it’s never too early to start learning about economics!

500 Words Essay on Economics Importance In Daily Life

Economics is a subject that helps us understand how the world works. It studies how people, businesses, and governments make choices about how to use resources. It’s like a guidebook that helps us make smart decisions about money and resources.

Economics in our Daily Lives

Importance of economics in spending.

Economics helps us make good decisions about spending. It teaches us to think about the value of things. For example, if you have only $10 and you want to buy a book that costs $15, economics can help you decide if it’s worth saving up for the book or if you should spend your money on something else.

Economics and Saving

Economics doesn’t just help us with spending, but with saving too. It can help us understand why it’s important to save money for the future. For example, if you save a part of your pocket money every week, you could buy a more expensive toy or game later. This is called delayed gratification, a key concept in economics.

Economics in Resource Allocation

Economics and jobs.

Economics is important in understanding jobs and careers too. It helps us understand why some jobs pay more than others and how supply and demand affect job opportunities. For example, if there are many people who can do a job, the pay might be lower. But if a job requires special skills that few people have, the pay might be higher.

In conclusion, economics is a part of our daily life. It helps us make smart choices about spending and saving. It teaches us to use resources wisely and understand the world of work. Just like a map helps us find our way, economics helps us navigate through life. So, even though it might seem like a tough subject, it’s worth learning because it’s so useful in our daily lives.

Apart from these, you can look at all the essays by clicking here .

Happy studying!

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The power of economics to explain and shape the world

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Nobel Prize-winning economist Esther Duflo sympathizes with students who have no interest in her field. She was such a student herself — until an undergraduate research post gave her the chance to learn first-hand that economists address many of the major issues facing human and planetary well-being. “Most people have a wrong view of what economics is. They just see economists on television discussing what’s going to happen to the stock market,” says Duflo, the Abdul Latif Jameel Professor of Poverty Alleviation and Development Economics. “But what people do in the field is very broad. Economists grapple with the real world and with the complexity that goes with it.”

That’s why this year Duflo has teamed up with Professor Abhijit Banerjee to offer 14.009 (Economics and Society’s Greatest Problems), a first-year discovery subject — a class type designed to give undergraduates a low-pressure, high-impact way to explore a field. In this case, they are exploring the range of issues that economists engage with every day: the economic dimensions of climate change, international trade, racism, justice, education, poverty, health care, social preferences, and economic growth are just a few of the topics the class covers. “We think it’s pretty important that the first exposure to economics is via issues,” Duflo says. “If you first get exposed to economics via models, these models necessarily have to be very simplified, and then students get the idea that economics is a simplistic view of the world that can’t explain much.” Arguably, Duflo and Banerjee have been disproving that view throughout their careers. In 2003, the pair founded MIT’s Abdul Latif Jameel Poverty Action Lab, a leading antipoverty research network that provides scientific evidence on what methods actually work to alleviate poverty — which enables governments and nongovernmental organizations to implement truly effective programs and social policies. And, in 2019 they won the Nobel Prize in economics (together with Michael Kremer of the University of Chicago) for their innovative work applying laboratory-style randomized, controlled trials to research a wide range of topics implicated in global poverty. “Super cool”

First-year Jean Billa, one of the students in 14.009, says, “Economics isn’t just about how money flows, but about how people react to certain events. That was an interesting discovery for me.”

It’s also precisely the lesson Banerjee and Duflo hoped students would take away from 14.009, a class that centers on weekly in-person discussions of the professors’ recorded lectures — many of which align with chapters in Banerjee and Duflo’s book “Good Economics for Hard Times” (Public Affairs, 2019). Classes typically start with a poll in which the roughly 100 enrolled students can register their views on that week’s topic. Then, students get to discuss the issue, says senior Dina Atia, teaching assistant for the class. Noting that she finds it “super cool” that Nobelists are teaching MIT’s first-year students, Atia points out that both Duflo and Banerjee have also made themselves available to chat with students after class. “They’re definitely extending themselves,” she says. “We want the students to get excited about economics so they want to know more,” says Banerjee, the Ford Foundation International Professor of Economics, “because this is a field that can help us address some of the biggest problems society faces.” Using natural experiments to test theories

Early in the term, for example, the topic was migration. In the lecture, Duflo points out that migration policies are often impacted by the fear that unskilled migrants will overwhelm a region, taking jobs from residents and demanding social services. Yet, migrant flows in normal years represent just 3 percent of the world population. “There is no flood. There is no vast movement of migrants,” she says. Duflo then explains that economists were able to learn a lot about migration thanks to a “natural experiment,” the Mariel boat lift. This 1980 event brought roughly 125,000 unskilled Cubans to Florida over a matter a months, enabling economists to study the impacts of a sudden wave of migration. Duflo says a look at real wages before and after the migration showed no significant impacts. “It was interesting to see that most theories about immigrants were not justified,” Billa says. “That was a real-life situation, and the results showed that even a massive wave of immigration didn’t change work in the city [Miami].”

Question assumptions, find the facts in data Since this is a broad survey course, there is always more to unpack. The goal, faculty say, is simply to help students understand the power of economics to explain and shape the world. “We are going so fast from topic to topic, I don’t expect them to retain all the information,” Duflo says. Instead, students are expected to gain an appreciation for a way of thinking. “Economics is about questioning everything — questioning assumptions you don’t even know are assumptions and being sophisticated about looking at data to uncover the facts.” To add impact, Duflo says she and Banerjee tie lessons to current events and dive more deeply into a few economic studies. One class, for example, focused on the unequal burden the Covid-19 pandemic has placed on different demographic groups and referenced research by Harvard University professor Marcella Alsan, who won a MacArthur Fellowship this fall for her work studying the impact of racism on health disparities.

Duflo also revealed that at the beginning of the pandemic, she suspected that mistrust of the health-care system could prevent Black Americans from taking certain measures to protect themselves from the virus. What she discovered when she researched the topic, however, was that political considerations outweighed racial influences as a predictor of behavior. “The lesson for you is, it’s good to question your assumptions,” she told the class. “Students should ideally understand, by the end of class, why it’s important to ask questions and what they can teach us about the effectiveness of policy and economic theory,” Banerjee says. “We want people to discover the range of economics and to understand how economists look at problems.”

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Prof. Esther Duflo will present her research on poverty reduction and her “proposal for a global minimum tax on billionaires and increased corporate levies to G-20 finance chiefs,” reports Andrew Rosati for Bloomberg. “The plan calls for redistributing the revenues to low- and middle-income nations to compensate for lives lost due to a warming planet,” writes Rosati. “It also adds to growing calls to raise taxes on the world’s wealthiest to help its most needy.”

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Exploring the Economics of Everyday Life

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Sahil L., a 12 th grader at The Emerald Heights International School in Indore in India’s Madhya Pradesh state, has a deep fascination for economics – not on a macro level, but in terms that he can relate to as a teenager. “When I first discovered economics, I wasn’t interested in knowing about the bilateral economic ties between two nations, but I would have definitely loved to know about how monopolies practice price discrimination and how it affects my decisions as a consumer ,” says Sahil, who is 17.

Still, when Sahil leafed through business publications at his school library, often he couldn’t find satisfying explanations for various economic concepts and the fundamentals that drive business activities. Questions persisted in his mind about issues like the impact of India’s demonetization of high-value currencies that took place about a year ago or how government policies impacted certain industries.

At the Grassroots Level

Sahil saw a market need and he found a way to meet it. Last year, he launched a biweekly magazine that he calls EcoGyaan (the word “gyaan” in Hindi means knowledge), with the tag line “The Economic Explorer.” Launched in July 2017, you can also subscribe to the magazine online at www.ecogyaan.com. “Indian students lack exposure to research and self-thought,” says Sidharth Singh, Emerald Heights’ principal, adding that he whole-heartedly encouraged Sahil when he suggested the magazine idea.

Published regularly with eight-to-10 pages each, EcoGyaan has covered issues like how a bank could protect itself from a liquidity crisis; regulatory policies that govern street food; and how the mobile payments industry works. Each issue also includes one economic term that is explained in depth, like monopoly , liquidity or GDP .

“I wanted to know more about the economics of industries that are integral to fulfilling my daily needs and read about policies that affect me directly at the grassroots level,” says Sahil. He sensed a need for a financial magazine that covers topics “that are relevant to people in real life and help them connect their observations to what they read.”

Sahil produces EcoGyaan with minimal help from friends, and gets it printed locally from his own funds. He has priced each issue at Rs. 30 ($0.50), which is roughly the cost of production. EcoGyaan has 110 subscribers; its total print order is 150 copies, and both are growing with each edition. Plans are to donate the profits to charity.

In the research for his articles, Sahil also conducts the occasional interview, such as one with a vendor of street foods (ready-to-eat foods sold from portable food carts or trucks), or another with the head of a non-governmental organization for an article on NGOs. He sometimes attempts to give his stories global comparisons, such as in the street-food article, where he referred to Thailand’s regulatory policies governing that sector.

Sahil also has policy prescriptions in some cases. For example, he says of the street food industry: “Although these are mostly illegal establishments, they should be included in the formal economy because they provide a huge boost to the GDP of a country.” He cites references to the informal economy in national income statistics to support his point. He advocates business model incentives at two levels here: for street food vendors to instill hygiene and sanitation principles, and also for government agencies to include them in the formal economy.

Economist in the Making

While he may not know exactly where his life after high school will take him, Sahil – who wants to study business in the U.S. – could easily be called a budding economist .

First and foremost, an economist studies the economy . The economy is the financial foundation upon which our society is structured. It involves producing, exchanging, distributing and consuming goods and services. When you buy an iced latte and chocolate-filled croissant each morning, you are contributing to the economy. Selling an autographed baseball on eBay? That’s the economy. Working at Shop-Rite three days after school? That’s the economy. Socking money away in your savings account? You got it — the economy.

According to the U.S. Bureau of Labor Statistics, an economist studies the production and distribution of resources, goods and services by collecting and analyzing data , researching trends and evaluating economic issues. Economists have all kinds of jobs, such as professors, government advisors, consultants, and private sector employees, and they can specialize in various disciplines, including health, gender, the environment, education and immigration.

Employment of economists is projected to grow 6% from 2016 to 2026, about as fast as the average for all occupations. Job prospects should be best for those with a master’s degree or Ph.D., strong analytical skills and experience using statistical analysis software. People rely on economists to let them know if the economy is improving or heading for trouble. Economists can study factors related to the economy, like jobs, interest rates, the stock market and taxes.

A quick look at economists in the news this week suggests the broad scope of their responsibilities. Bank of Singapore chief economist Richard Jerram said the global economic recovery will benefit Singapore as a trade-dependent economy and regional financial hub; Mark Zandi, chief economist at Moody’s Analytics, reported that the U.S. job market is “red hot, with broad-based job gains across industries and company sizes;” and Ashima Goyal, a member of the Prime Minister’s Economic Advisory Council in India, concluded that the Indian Central Bank’s tendency to overestimate inflation has cost the economy.

During a November 2017 interview at New York University’s Stern School of Business, Janet Yellen, the outgoing chairwoman of the U.S. Federal Reserve, explained that she decided to be an economist while an undergraduate student at Brown University. “I always liked math, but then I discovered economics,” she said. “It’s a field that does use rigorous analytical techniques, empirical methods and modeling that requires math. What I loved about economics is that it is also a field that has an impact on and is concerned with social welfare and economic well-being. So, it was a combo of being about people and their lives…and it used math and reasoning.”

Learning about economic concepts can help you to understand the news, make financial decisions, shape public policy and see the world in a new way. This reflects Sahil’s mission for EcoGyaan, which, with his school’s support, he hopes to develop beyond the hobby phase. He says, “ One of the most important things I have learned as part of the journey is to have the curiosity to study the economics of every day happenings around me and learn more about the short-term and long-term implications.”

Sahil Lalwani advocates that street foods should be included in the formal economy because they provide a huge boost to the GDP of a country.

Conversation Starters

How might economics help you see the world in a new way?

The article introduces job prospects for economists. Would you like to become an economist? Share your perspective in the comments section of this article.

10 comments on “ Exploring the Economics of Everyday Life ”

Just this summer, I was volunteering at an institution that teaches non-Mandarin-speaking children Mandarin. The Mandarin teacher designed an activity, where children buy snacks from the supermarket and then sell them to the other native-mandarin-speaking children in the camp. The purpose of this activity was to put the children in a Mandarin-speaking environment and push them to speak Mandarin. However, in my eyes, it was just a perfect and fascinating mini economic model! There is the concept of supply & demand, there are oligopoly, inflation, and many other economics concepts coming into real life.

We are talking on a microeconomic scale, the sale of snack is an industry and the. The beginning of this model is the supermarket, and they are like factories that produce the output. However, it does not play an important part in this model because it is not a variable that I could control. Also, the main actors are my campers and Chinese campers.

Me and my partner, their teachers, acted as both the bank and the government. We printed coupons for the Chinese campers as a substitute for real money and acted as a regulator for policies and prices. Our campers were split into four groups, each given 100 Yuans (Chinese currency name) to buy goods from the supermarket. These four firms in the industry clearly formed an oligopoly in terms of market structure. There is a couple of evidence to prove that, for example, there are only 4 firms dominating the industry, they sell differentiated and identical goods (similar snacks), and there is a significant barrier of entry into the industry. As for the consumers, we printed and distributed 100 coupons per class every time our campers import 100 Yuans worth of goods, to 7 classes with an average of 20 people each class. Because the money supply is not very much when distributed to each camper, they were encouraged to buy the goods together and share.

I am really interested in how the supply and demand of the firms impact the price of the industry. So I observed.

What I didn’t take into consideration is that the children did not know anything about market competitions, and they just simply don’t have the concept of “trying to make profit” in their mind. There are too many missing factors of the market in this model. Causing them to set the price for each good too low (about 2 Yuans on average), also because the consumers had a large amount of money altogether, the goods were bought out too soon. Supply more than demand —> Shortage. I started to think, how can I make this work? First, I should make sure that there is no shortage or surplus for the market, and then I could test out how the demand curve works in an oligopoly.

I communicated with the Mandarin teacher and asked her to talk to the children about setting the price higher to make supply and demand reach equilibrium. I am aware that no one could actually draw a graph of supply and demand for the firms to help them to set the price, the only way for them to know what price to set, is to test it out.  They had three chances to go to the supermarket and import goods to their student shops, they have already used one chance, so they have two left. The second time, they set an average price of 6 Yuans each good, then caused a surplus as they couldn’t successfully sell out all the goods. Also because they have leftover goods from the second day, they have an extra day to sell out these goods. They lowered their price to 4 Yuans. This time, they sold all their products with few consumers left in the line. The third time, all firms started with an average price level of 4 Yuans. Suddenly, one firm decided to lower the price by 1 Yuan as a promotion method, they advertised in the entire cafeteria about this news. Just in a while, many consumers turned to that firm. The other firms saw their costumers moving to that firm. They also decided to lower the price.

I was fascinated by this, and it actually follows the law of oligopoly! But unfortunately, no firm decided to raise the price again, I didn’t get to witness the other part of the oligopoly demand curve.

Another problem we faced was the amount of money that we are printing and distributing. We didn’t know how much money we should distribute and some campers lose their money then asks for more. We were afraid that by letting too much money flow in the currency might cause inflation, which will make things much more complicated. We didn’t technically figure out a method to solve this, but it worked pretty well with our method of distributing.

In a nutshell, this is an amazing experience for me, discovering the economics of everyday life!

The article introduces job prospects for economists. Would you like to become an economist? I believe that while the study of economics is fun and relatively fulfilling, I don’t believe that I would like to be an economist in the future. While economics is a good way to learn more about the world, I feel that being an economist requires intricate attention to details in the market, something that I am not great at doing. Thus, I don’t think that being an economist would be the right path for me in life.

What are some of the ways Lalwani explored these economics? What would you like to learn more about? “Sahil saw a market need and he found a way to meet it.” I want to learn more about marketing management How might economics help you see the world in a new way? It helps you take care of money.

Sahil L. says, “I wanted to know more about the economics of industries that are integral to fulfilling my daily needs.” Can you give an example from the article? What are some of the ways Lalwani explored these economics? What would you like to learn more about? He began by finding publishing the daily news to learn how the economy works and why it does certain things such as increase or decrease. I would like to learn more about how these certain topics increase or decrease.

How might economics help you see the world in a new way? It might help you take the numbers into consideration and be better at managing your money. The article introduces job prospects for economists. Would you like to become an economist? I don’t think I would because I would like to explore more of the broker side of business.

Sahil L. says, “I wanted to know more about the economics of industries that are integral to fulfilling my daily needs.” Can you give an example from the article? What are some of the ways Lalwani explored these economics? What would you like to learn more about? Some ways Lalwani explore are publishing the daily news to gain better knowledge of economics, and the system of economics. He also acquired knowledge of why the idea of increasing and decreasing exists. I would like to learn more about how economics are blended in our life and how to start analyizing the economics in our daily life.

How might economics help you see the world in a new way? Economics will help me see the world in a new way. By learning about economics, I will be able to enhance the world in a different aspect. I will be able to make rational decisions on needed situations, understanding about incenteives will help me understand the background of other people and predict the answers they will make.

The article introduces job prospects for economists. Would you like to become an economist? I would like to become an economist. It would be intersting to learn and work in the fields of finance and analyzing datas. Moreover, working as a economsits would support my banking skills and my own financial judgement.

“I wanted to know more about the economics of industries that are integral to fulfilling my daily needs and read about policies that affect me directly at the grassroots level,” So Lalwani explored and created a magazine that covers topics “that are relevant to people in real life and help them connect their observations to what they read.”

What would you like to learn more about? I would like to learn more about money management during inflation.

How might economics help you see the world in a new way? It helps me see what i am exactly putting my money into/buying and what goes around comes around.

I wanted to know more about the economics of industries that are integral to fulfilling my daily needs.” Can you give an example from the article? What are some of the ways Lalwani explored these economics? What would you like to learn more about? He began by finding publishing the daily news to learn how the economy works and why it does certain things such as increase or decrease. I would like to learn more about how these certain topics increase or decrease.

1)In order to understand how the economy functions and the reasons behind various events like increases and decreases, he started by looking up the daily news publications. I’m interested in finding out more about the rise or fall of these particular subjects.

2)You might be able to analyze the figures and improve your money management as a result.

3) I would not like to become an economist because I would rather go into finance.

I was interested in learning more about the economics of sectors of the economy that are essential to meeting my basic necessities. Could you provide a sample from the written piece? What methods did Lalwani use to investigate these economics? About what would you like to know more? In order to understand how the economy functions and the reasons behind various events like increases and decreases, he started by looking up the daily news publications. I’m interested in finding out more about the rise or fall of these particular subjects.

In what ways may economics broaden your perspective on the world? You might be able to analyze the figures and improve your money management as a result. The article presents economists’ employment opportunities. Do you want to work as an economist? Since I’d like to learn more about the trading side of business, I doubt I would.

How might economics help you to see the world in a new way? one could use economics to analyze numbers, and as a result, one could learn how to manage their money more efficiently. would you like to become an economist? I would not want to be an economist because I am more interested in finance and private equity.

Economics and Its Meaning in Everyday Life Research Paper

To find inspiration for your paper and overcome writer’s block
As a source of information (ensure proper referencing)
As a template for you assignment

Introduction

Modern economics, profit maximisation, social benefit.

Economics is the social science of making sufficient choices or decisions and studies how people interact in their society economically. This paper introduces the subject of economics and unfolds what it is all about. We live in a society where economics is a valuable need in order for us to understand and handle any problems that may occur in the future. The basic economic problem is scarcity, where people’s wants and needs are unlimited. Every time a need is satisfied, a new need is then created thus, creates the unlimited wants and needs of the human characteristic. The problem of scarcity results in allocation, which is the process of choosing needs that will be gratified and how many resources we will use in order to satisfy them. Because there are so many wants waiting to be satisfied, there are only so many resources to fulfill those wants. Limited resources are the condition of there not being enough resources to fulfill all wants and needs.

Since economics is all about making choices, people must understand the cost and benefits of any choice in order to make competent choices. Opportunity cost and Opportunity benefits guide the decisions process of individuals and countries and determine the goods to which they are going to be produced. However, Opportunity cost is the option that you must give up when you make a choice, and opportunity benefit is what you gain by making a certain decision. An example of opportunity cost and opportunity benefit is assumed one night you have a stack of homework waiting for you to do, but when your parents get home, they demand that you go out with them to eat dinner and catch a flick afterward. Yet you really want to do your homework and study, but you give up your education time to spend the night with your parents. Your opportunity cost of this is what you give up, and that is your study time; however, you do gain a benefit from giving up your homework, and that is a movie and a casual dinner with your parents.

Every society has basic economic questions, and when responding to these questions, societies must balance the needs of individuals with the needs of society together. The subject Economics is divided into two separate branches: microeconomics which examines the choices of individuals regarding one product, one firm, or one industry, and macroeconomics examines the conduct of the whole economy at once. Everything in life has a theory; in economics, the importance of theory is a simplified description of reality. The economic theory helps to understand the economic systems, which are the combination of social and individual decision-making it uses to answer the three economic questions. Economist uses an ideological tool called a budget constraint that is the mixture of goods that can be acquired although it is given a limited amount of income. A person goes through life they will make economic decisions as a consumer, as a worker, and as a citizen that will make an understanding of economic theory an important part of everyday life. (Cubitt, 2005).

Countries such as the United States use a variance of approaches in order to answer the basic economic questions. A market economy is buyers and sellers and is the state of trade as determined by prices, supply, and demand. The question of what to produce is decided by individual consumers and producers in the marketplace by using the price system. A command economy is all about government planners deciding what is produced and available for sale. A traditional economy is where prices are set because of holidays. A mixed economy is a combination of a market, command, and traditional economy. Although the U.S. has a great economy, the main economic problem still lies in our hands. Scarcity and choice exist in all economies. However, like our society, other societies use different combinations of individual and social choices to allocate resources.

Modern economics vs. political economy, as it used to be called-dates back to1776. It begins with the American Revolution. A man named Adam Smith, a Scottish philosopher, published a book called Smith’s work is considered the first example of modern economics. In some places, Smith is most famous for suggesting that businesses always try to monopolize markets and raise prices. Economists credit Adam Smith’s theory of the invisible hand – the idea that a market economy will operate so that no one can be made better off without making someone else worse off. It is as if an invisible hand is guiding the markets when in reality, the markets merely reflect the activities of those trading in them.

When prices for some widely consumed good or service surge or when some company s profits appear to reach stratospheric levels, the popular press seems to return to St. Augustine and ask what is the just price. Others maintain that economics began much, much earlier. Economics figures in most national elections. John Kennedy was elected during the recession that plagued the prior administration; the recession ended in the second month of Kennedy s term as he demonstrated a combination of timing and luck matched by few Presidents. Franklin D. Roosevelt s landslide victory in 1936-based on his efforts to turn back the Great Depression- set the course for the next several decades of U.S. politics. The economy is telling us what s happening and what could happen next. To understand the economy, you have to look at how the economy is measured, scaled, and gauged. How big, rich fast-growing it is. The economy in the United States and increasingly throughout the world is organized into markets. Markets are where we trade things- someone s labor, time, and effort for his wage; or hard-earned dollars for a car.

Markets are rather old-maybe as old as civilization itself. Markets are crucial to understanding the economy. They include much more than the stock market, although that one is quite interesting. Markets exist for almost anything-time and labor, art, cars, things we make, and services we buy. Most markets have common elements, patterns that make buying a car and getting a second opinion before surgery almost the same thing. As the axiom goes, the only constant changes. In the economy, changes occur all the time. They are what shift prices ad gives rise to opportunities.

Economics is the rules of the game, how we organize society. Most of what we see as important in everyday life is organized by the economy. On a day-to-day basis, economics has to do with what kind of job we have or don’t have; with how much money we can earn; with what things cost; with whether we can save and invest enough for a comfortable future; with how much we need tomorrow and with how well off our children will be in coming years. Economics is why we have jobs. Why we work, why we earn incomes, why money matters, and why markets are important. Economic ideas contribute to the way our society is organized. That the kind of organization we have today has evolved gradually doesn’t t make the principles behind it any less important. It evolved through history to the current arrangement and is still changing and evolving. The social fabric is always likely to be changing. Many of the principles behind the current organization depend on economics and include many ideas.

Principles of economics include Private property- we can own land, houses, tools, books, and all kinds of other goods and use them, or dispose of them, as we wish. Another is a job. We have jobs and earn income with our labor. Human rights-we do to own other people and don’t have pre-emptive rights to someone else s labor and property. Markets- the way we exchange private property or exchange labor for income is through a voluntary bargaining process called a market. We use money as a way to store wealth and to buy and sell things we own, including our own labor.

The thing that distinguishes markets and money from other elements of the economy is that they are a little more fundamental. In almost any society based on private property, both money and markets are present. Not much private property is needed to give rise to markets and money just enough so that people have some things to exchanges and need a way to keep track of how much money they have. Trading has been practiced since before recorded history. Ancient tribes traded with one another to get essential tools that were hard to make locally. (Samuelson, 2005) Today economist speaks of gains form trade.

The most misunderstood part of economics is in public debates. Recently the political arena has echoed with arguments over the budget deficit and the national debt. We hear every possible opinion, from claims that we are about to drown in our own red ink, to suggestions that we ignore the debt, to claims that cutting our taxes will lead to larger tax revenues for the government and a drop in the deficit. Some of these arguments are involved; the difference between the national debt and the budget deficit is rather straightforward. Each year the government collects taxes and spends money. When expenditures exceed revenues, the government is left with a gap. This gap is the deficit.

Expenditures cover a wide range of items, including social security benefits, Medicare and Medicaid payments, salaries of government workers, foreign aid, and government purchases from paper clips to jet planes. The numbers and reports on the national debt have another important complication. The government saves some revenues by investing them in Treasury bonds. Measurement of economics has a venerable history. For a long time, people thought the only thing to economics was measuring or counting. Forecasts almost always require numbers- at times to provide a forecast that really gets specific, at other times to make a vague forecast look specific enough to be worth paying for. (Fontaine, 2005) Sometimes economics drives the way we measure. As we look at the unemployment rate, deciding what we measure often involves understanding the economy and its various sectors and markets larger.

Some longer-term issues related to the deficit are also legitimate concerns. Over the last few decades, the proportion of total income that America saves and invests in forth future has declined. If we invest less today, there will be less wealth tomorrow. One reflection of the decline in savings is the rise of the deficit. Simply worrying about the deficit, some politicians argue, is the wrong response. Increasing savings is the right response. Japan, in its peak years of economic growth, had far more savings and a far larger than in the United States.

One of the more recent developments in mathematics, physics, and related sciences is a collection of studies alternately referred to as complexity theory, self-organization, and chaos theory. While some commentators may argue that economics has a special claim on chaos, there are interesting parallels between many of these studies and economics. (Keen, 2004) One of the ideas behind these theories is that at times a collection of objects- animals, computer programs, people, or almost anything else-will seem to become very well organized without any systematic communication or planning.

The economy surrounds us, and it plays a large part in our lives. It has more impact than the weather on how we live and how well we live. Economics runs through other parts of our lives as well. If the economy is in a recession or a depression, it hits a lot of people. The economy helps us keep track of the nation’s standing. The economic system has grown since Adam Smith s book. Right now, since the economy is good, it is easy to get jobs. During a recession or a depression, the economy is the indication of what is going wrong and what to fix. Everyday life is circled around the economy. The different kinds of markets provide a different understanding. The stock market also is an indicator of the economy. The stock market shows the sales and wealth of the different markets around our country. If the economy is good, we know it. It shows everywhere, and politicians don’t hesitate to base an election on how well they did or how awful the economy was under another politician. It will make or break the politician.

All of the businesses have common factors. They all provide products in the form of goods or services. For example, books, food, fitness training, utilities, etc., some of the products provided by businesses are needed by customers. They are, in essence, providing necessities, for example, basic food and clothing. Some businesses, on the other hand, provided products that customers can be persuaded to want through advertising. For example, luxury food, fashion clothing, or a holiday, etc. A business may therefore be defined as; an organization that provides goods or services which satisfy customer needs and wants.

The objective of profit maximization brings with it an imperative question to be considered in great detail; should businesses maximize profits? Businesses have a social responsibility. They need to aim to reduce pollution, improve safety levels, and preserve jobs, etc. firms, in the effort to maximize profits, go against many social and ethical issues, for example, if materials needed by a firm can be found cheaper abroad, profit-maximizing firms will by from countries whose political regimes, the U.K. public may not approve of. It is argued, however, that in order to pay attention to aspects, such as pollution levels, and preservation of jobs, etc., the firm needs to be financially stable. In other words, they need to be making a profit. The importance of profit is just one aspect of the profit-maximizing position of a firm, which adopts the profit-maximizing objective. (Ernst, 2007).

In a short conclusion to the profit-maximizing objective of a firm, one might suggest that there is only one valid definition of a business’s purpose: to create a customer. Profits, then, are the results of being in business. They test how efficiently a business has created a customer in terms of the cost to the business in relation to the revenue gained through the customer.

The size of a firm displays a close correlation to sales revenue. As such, sales revenue is often considered a surrogate. It is said that although high levels of profit bring with it benefits to the owners or shareholders of a firm, high levels of sales revenue, on the other hand, brings with it benefits for managers, for example, higher levels of income.

One major difference to note between profit maximization and revenue maximization is the term to which the objectives are set. A firm whose overall objective is profit maximization is said to have such an objective set long term. In other words, the objective is hoped to be met over a five-year period. A firm whose overall objective, on the other hand, is revenue maximization, is said to have such an objective set short term, the objective is hoped to be met over a two-year period. (Fullbrook, 2004) Perhaps another significant difference to note is that of by whom such objectives have been set. Managers had both the ability and motivation to pursue objectives other than Profit Maximisation, and as we will see soon, this ability and motivation of firm’s managers extend to them being able to pursue Non-Maximising objectives, for example, Social Benefit. Similarly to Revenue Maximisation, controllers of a firm are more interested in objectives that satisfy them, such as Salary, prestige, and status, and job security. (MacKenzie, 2003).

As with those who commit to Revenue Maximising objectives, those who set Growth Maximisation as their objective do so with consideration of what growth the owners in the firm want to see, such as profit, sales, and market share. These different sets of objectives are reconciled by concentrating on the growth of the size of the firm, which in turn will bring with it high salaries and status for managers and larger profits and market shares to keep the shareholders happy. As with the Profit Maximising objective, growth maximization has to limit factors or constraints, both managerial and financial. Finding a product or a market to expand can prove problematic to the management team of a firm. Having found an area of expansion, the management team also faces the limitation of remaining in control of such expansions.

In order to become a growth-driven company, investments need to be made. The funds required for such investments are ever-increasing and can be obtained by either internal investments by the use of retained profit, or external investments funded by borrowing, the latter creating further liabilities for the firm. (Amos, 1994) If either of the aforementioned means of investments is not closely controlled, the risk of either takeovers or shareholder revolt is increased, which intern would have a knock-on effect on the job security of management. Ensuring that the growth of demand is matched equally by the growth in capital supplied can satisfy the above constraints. Control of the leverage revenue will help to keep the level of borrowing in check. Control of the liquidity ratio can prevent a firm from becoming insolvent. Finally, via the retention ratio, profits can be distributed sufficiently in order to keep shareholders happy.

Businesses have a significant contribution to social welfare; we visited this idea earlier when discussing the profit maximization objective of a firm, where one stated the importance of pollution reduction and job security etc. By paying attention to the social welfare of consumers and employees, those within firms will benefit. Namely, suppliers of capital, labor, and other resources that have in the past received substantial returns for their contribution to the improvement of social welfare. Consumers can also benefit where social benefit is the key objective of a firm, through increasing the quality and quantity of the goods and services available to them for consumption.

The public can, in many ways, be the backbone of a firm. They state that the very existence of certain firms is a result of public consent and that as such, those firms that are amongst the most successful tend to be those that exercise socially responsible behavior. It is said that Social Benefit is not a maximizing objective because, in order to be an objective, it would be required to be measurable. Rather, the social benefit is considered in terms of what combinations of goods and services should be produced? How many goods and services should be provided? And finally, how they should be distributed.

There are five main maximization objectives of a firm. You will have noticed throughout the descriptions a mention of the differentiation between managers and owners of a firm. Most large firms tend to be run by professional management teams rather than the owner of the firm. As such, conflicts in the interests or direction of the firm can and do happen. Such conflicts occur as a result of differences between the objectives of the owners and of the managers, also referred to as controllers. The main aim of the owner of a firm is that of maximization of the overall value of the firm, whether that is maintained through profit maximization, revenue maximization, management utility theory, company growth, or indeed social benefit.

The above conflicting interests of a firm’s progression can be better defined as the principal-agent problem, whereby objectives, different to those of the principle, also referred to as the owner, are pursued by the agent, also referred to as the controller or manager. The problem or conflict occurs when the principle has difficulty enforcing their contracts upon the agent or when the monitoring of the agent to verify that they are furthering the principle’s objectives becomes unjustifiably costly.

In economics, profits are not merely an objective; they are, in fact, the very reason for the existence of the business enterprise. The statement alone opens discussions regarding the existence of a firm. For Example, A charity shop, by its very nature, does not thrive on profit as a means of existence, rather, it relies on the generosity of the general public, and therefore it would be fair to suggest that the objective of most charity shops is a social benefit. The nature of a business, its size, location, and management model will all together determine the route to which the company wishes to follow. Thus the objectives it will set. When looking into any business, large or small, one will see that no single decision is clear, there are many clouds surrounding the smallest of decisions, and so the analysis of firms, and in particular, the objectivity of a firm, cannot be made in black and white, there is simply too much about the organization, macro and microeconomics, politics and social factors to consider, all of which are ever-changing.

Amos, Orley. Economic Literacy . Hawthornel, New Jersey: Career Press, (1994).

Cubitt, Robin (2005) “Experiments and the Domain of Economic Theory,” Journal of Economic Methodology 12: 297-210.

Ernst, Z. (2007) “Philosophical Issues Arising from Experimental Economics”, Philosophy Compass, Blackwell.

Fontaine, P. and R. Leonard (2005) The Experiment in the History of Economics London: Routledge.

Fullbrook, Edward, What’s Wrong With Economics, Anthem, (2004).

Keen, Steve, Debunking Economics, Zed Books, (2004).

MacKenzie, D. F. Muniesa and L. Siu (eds.) (2003): Do Economists Make Markets? On the Performativity of Economics. Princeton: Princeton University Press.

Samuelson, L. (2005) “Economic Theory and Experimental Economics”, Journal of Economic Literature 43: 65-107.

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How Does Economics Affect Our Lives?

Economists like Guido W. Imbens, a Nobel Prize winner, make decisions that affect every aspect of our lives.

We don’t always realize it, but economists play a key role in our everyday lives. They help elected officials determine the best ways to lower poverty rates, forecast the need for goods and services, and fund new roads and bridges.

To learn more about this crucial work, I spoke with Guido W. Imbens, a Dutch American economist. Imbens teaches at the Graduate School of Business at Stanford University. In 2021, he shared the Nobel Prize in Economic Sciences with Joshua Angrist, an Israeli American economist at the Massachusetts Institute of Technology.

Imbens uses data from the real world to find outcomes for experiments that can’t be run for a variety of reasons. For example, lawmakers may want to understand how additional years of education contribute to financial success. But they can’t prevent one group of children from going to school in order to test their theories. That’s where Imbens and economists like him can help. They use mathematical methods to draw conclusions about how best to implement policies that affect all of us.

Below are highlights from my conversation with Imbens, which has been edited for brevity and clarity.

Munveer meets up with Imbens in California.

Can you tell me a little bit about yourself and how you became interested in economics?

I grew up in the Netherlands, in a town in the south called Eindhoven. It’s close to the Belgian and German borders. I went to college in Rotterdam. There, I studied econometrics, which is a combination of math and economics.

My teacher gave me a book on economics by Jan Tinbergen, who shared the first Nobel Prize in Economic Sciences in 1969. Tinbergen was also from the Netherlands. I found the book very interesting. I wanted to do something related to math but not pure math, and economics checked all the boxes for me.

What was it like when you learned that you had won a Nob el Prize?

It felt incredible. I got to experience it with my family. I got a call at 2:08 a.m., which I missed, and then again at 2:13 a.m. The second time, I saw it was a Swedish number. [The Nobel Foundation is headquartered in Sweden.] My wife and I stared at each other for a moment. We were all very excited. My kids made breakfast for the entire Stanford University film crew, who were there with us.

A Nobel Prize is the most prestigious award a scientist can receive.

Can you describe your work for our readers?

A big challenge in economics is that often we can’t do experiments. We’re interested in advising policymakers about the impact of various policies, but we’re unable to do experiments in many cases due to ethical or other reasons.

For example, during drug trials, pharmaceutical companies do a randomized experiment where they select two different groups and see how the drug affects each group. But in many cases, we can’t do that in economics. For example, the United States government and Social Security System might be interested in understanding the effects of a universal income and whether it would create an incentive for people not to work. For obvious reasons, the government can’t tell a group of people that they get a free salary, while another group doesn’t.

Through my research, we found a close alternative. I got data from the Massachusetts Lottery about people who got a lottery payout of $25,000 annually over the course of 20 years. We were able to study how the winnings affected behavior. We saw that the people who won worked a little less, and some of them retired a little earlier. But there wasn’t a big effect. So you would learn that if we had a universal basic income, it might not greatly affect the labor supply [the number of people willing to work].

In one of your interviews, you said, “The challenge is coming up with a good question.” What are some of the most interesting questions in economics today?

There are a lot of questions about climate change and how the economy is going to be impacted. Humans over history have shown that they’re very good at adapting. So figuring out what the government can do to ensure that communities are going to be flexible and ready to adapt to the new challenge is very interesting.

What advice do you have for students who are interested in economics?

As a child, I was very interested in chess. It taught me to think hard and really dig deep into problems. I learned to find a time that is free of distractions. It’s important to focus, dig deep, and put in a lot of effort.

5 Economics Examples in Everyday Life

Economics is present in our everyday life. It is a branch of science just like Biology, Physics, and Chemistry. The concepts of economics can be observed in e very activity, monetary transaction, and finance-related decision we take in our lives. Let us discuss it further with the help of a few examples!

Purchasing Goods that Offer the Highest Satisfaction for the Price Paid

We compare the price paid for a commodity to the satisfaction it brings us. If the commodity purchased is useful and has utility, a consumer would consume more quantity of it. For example, airlines charge every passenger a basic fare but when you demand facilities like extra legroom, priority-boarding, a window seat, or an upgrade to the business class, there’s an additional cost attached to thee facilities. Hence, this is an example of the presence of Economics in our everyday life. As a consumer, if we decide that by paying extra we get more benefits and it makes sense to us, it means we analyzed its marginal benefit in comparison to the marginal cost.

Sunk cost means when the money paid for certain services, goods, or commodities is irretrievable. For example, let us talk about gym memberships. So many of us are tempted into signing up for an annual gym membership. Initially, we might be regular at it, knowing that it is important for our health, and we have paid the fee for it. Somehow, in between, we might not be attending the gym regularly. Whether we attend it regularly or not, we cannot get a refund for the annual fee that has been already paid. So, in this situation, we’ll have to write off the annual gym membership as a sunk cost.

Opportunity Cost

The science of Economics tells us that resources are scarce and limited. Scarcity means that the resources available are less in quantity than their demand. The concept of opportunity cost rises from this fact. For example, if we spend all our money on buying food, we won’t be able to spend money for other purposes such as entertainment, health, and lifestyle. The concept of opportunity cost states that we must inspect all the factors attached to the choices we make.

Economics is in our Behavior

Economical theories assume man to be rational. But, behavioral economics states that man can make biased decisions depending upon behavioral factors. Let us understand this notion with the help of another everyday example. We all tend to give ‘entertainment’ a lot more important in our day-to-day life. We do not realize its long-term implications for our future. Consumption of junk food and alcohol in the present reduces the scope of having a secure retirement in the future. Hence, by spending more money on our present-day entertainment needs, we are neglecting our long-term welfare.

Diminishing Returns

The concept of diminishing returns states that as we consume higher quantities of something, we start experiencing less satisfaction from it. The same concept also implies money, also known as diminishing returns to money. The more money we earn, the less time we get to spend that money. For example, earning an additional 100$ will give us more utility and purchasing power but we will have less time to spend that money.

From opening a bank account to fixing a budget for your expenses, every activity involves Economics. It is an integral part of our daily lives.

Economics in Everyday Life

Essay by mishimmy1 • August 29, 2015 • Essay • 1,482 Words (6 Pages) • 2,507 Views

Essay Preview: Economics in Everyday Life

There are many misconceptions about the definition of economics. Many people hear the word ‘economics’ and assume that it’s all about money. Economics is not all about money; it is about the choices we make as human beings. It focuses on why we make the choices we do in terms of cause/effect and benefit/cost. Some of these decisions involve money, but most do not. Most of your daily decisions have nothing to do with money, yet they are still considered a subject of economics. For example, what are the advantages and disadvantages of studying at university versus starting a job now? Should I buy that pair of shoes? What’s the best route to work? There is no one correct answer to these questions. Every person has their own set of principles and beliefs that they follow, and as such, the economic choices we make – as well as their value – are highly subjective. The following essay will explore the definition of economics through my experience as an economics student, and how economic theories apply to everyday life.

One of the more famous and widely accepted definitions of economics comes from Lionel Robbins, who defines it as:

“the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.”

In other words, economics is a way of understanding people’s behaviour in an attempt to fulfil wants and needs. Our resources are limited – or scarce as Robbins puts it. But our needs and wants are unlimited. So herein lies the problem; how do we fulfil our unlimited wants and needs with scarce resources? People must weigh up choices and their alternatives, all of which will have consequences. In a perfect world, we would have unlimited resources and everyone would have what they desire. But we don't live in a perfect world, and consequently not all wants can be fulfilled. Therefore, wants and needs must be prioritised and decisions made about the allocation of resources. As we acquire a greater understanding of economics, we can make more informed decisions about the allocation of resources.

There is no such thing as ‘a free lunch’. We generally must give something up in order to attain what we want. The relevant cost in economic decision-making is referred to as the ‘opportunity cost’. Opportunity cost is the value of the next best alternative you give up. This value is unique to each individual. There doesn’t always have to be a monetary value attached to the cost; it can be anything of value to the person such as time or effort. For example, it’s exam time and your friend invites you to go to a party. You know you need to study for your last exam, but you don’t want to miss out on a fantastic party. A rational person would determine that the cost of losing study time and sleep is greater than the benefit of having fun with your friends at a party. You’re almost finished and you can party as much as you like once exams are finished, therefore you decide to stay in and study.

In economics, decisions are characterised by marginal cost and marginal benefit. When a slight change has been made to a plan, a rational person will compare the costs and benefits of this change. If the marginal benefit of an action is considered to outweigh the marginal cost, then that action will proceed. For example, should I purchase the ice cream that’s on sale, even though it doesn’t taste as good as the more expensive brand? If I go with the cheaper brand I can afford to go to the movies later this week. In my opinion, the benefit is greater than the cost and therefore I decide to sacrifice the taste of ice cream in order to see a movie with friends. However another person might decide that the more expensive ice cream is worth the money. This shows that the value of an economic decision is unique to the person, and as such, is determined by their needs, wants, time and resources.

There are two main categories of economics: microeconomics and macroeconomics. Microeconomics studies the economic decisions of individuals, households and businesses that make up the greater economy. Of particular interest is how people respond to changes in price, and why they demand what they do at a particular price point. This is also known as the law of supply and demand.

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College essays that worked and how yours can too.

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CAMBRIDGE, MASSACHUSETTS - JULY 08: A view of Harvard Yard on the campus of Harvard University on ... [+] July 08, 2020 in Cambridge, Massachusetts. Harvard and Massachusetts Institute of Technology have sued the Trump administration for its decision to strip international college students of their visas if all of their courses are held online. (Photo by Maddie Meyer/Getty Images)

The college essay is a pivotal piece of the college application showcasing your individuality and differentiated outlook to admissions officers. What makes an essay truly shine? Let’s dive into the words behind three standout essays so you can get into the right mindset for crafting your own narrative.

Embracing Differences: Finding Strength in Uniqueness

Essay Excerpt: " Bra Shopping " (Harvard)

This essay recounts a student's humorous and insightful experience of bra shopping with her grandmother, weaving in her unique family dynamics and challenges at her prestigious school.

What Works:

Humor and Honesty: The student's humor makes the essay enjoyable to read, while her honesty about her challenges adds depth.
Self-Awareness: She demonstrates a strong sense of self-awareness, embracing her uniqueness rather than trying to fit in.
Resilience: Her narrative highlights resilience and the ability to find strength in differences.

For Your Essay : To write an essay that embraces your uniqueness, start by identifying a quirky or challenging experience that reflects who a key insight into your experience. Think about how this experience has shaped your perspective and character. Use humor and honesty to bring your story to life, and focus on how you have embraced your differences to become stronger and more resilient.

‘The Acolyte’ Rotten Tomatoes Score Keeps Falling, And Maybe It Should If We Ever Hope To Find Balance In The Force

Wwe raw results, winners and grades after great wyatt sicks follow-up, china delivers another economic blow to russia, finding connections: humor and self-reflection.

Essay: " Brood X Cicadas " (Hamilton College)

Nicholas writes about the cicadas swarming his hometown every 17 years and draws a parallel between their emergence and his own transition to college life. He uses humor and self-reflection to create a relatable and engaging narrative.

Humor: Nicholas uses humor to make his essay entertaining and memorable. His witty comparisons between himself and cicadas add a unique twist.
Self-Reflection: By comparing his life to the cicadas’, he reflects on his own growth and readiness for change.
Relatability: His narrative about facing new experiences and challenges resonates with readers who have undergone similar transitions.

For Your Essay: To infuse humor and self-reflection into your essay, start by identifying an ordinary experience or object and think about how it relates to your life. Write down funny or insightful observations about this connection. Use humor to make your essay more engaging, but ensure it still conveys meaningful self-reflection. This balance can make your essay both entertaining and profound.

Persistence and Multicultural Identity: Life Lessons from Tortilla Making

Essay: " Facing The Hot Griddle " (Johns Hopkins University)

In this essay, the student uses the process of making tortillas to explore her multicultural identity and the challenges she has faced. Her story beautifully weaves together her Guatemalan heritage and her experiences growing up in the United States.

Metaphor and Symbolism: The process of making tortillas becomes a powerful metaphor for the student’s journey and struggles. The symbolism of the masa harina and water mixing parallels her blending of cultural identities.
Personal Growth: The essay highlights her perseverance and adaptability, qualities that are crucial for success in college.
Cultural Insight: She provides a rich, personal insight into her multicultural background, making her story unique and compelling.

For Your Essay: To write an essay that explores your identity through a metaphor, start by thinking about an activity or tradition that holds significant meaning for you. Consider how this activity relates to your life experiences and personal growth. Use detailed descriptions to bring the activity to life and draw connections between the process and your own journey. Reflect on the lessons you've learned and how they've shaped your identity.

A winning college essay isn’t simply about parading your best accomplishment or dramatizing your challenges. It’s not a contest for which student is the most original or entertaining. Rather, the essay is a chance for you to showcase your authenticity, passion, resilience, social awareness, and intellectual vitality . By sharing genuine stories and insights, you can create an essay that resonates with admissions committees and highlights your unique qualities.

For you to have the best possible essay, mindset is key. Here’s how to get into the zone:

Reflect Deeply: Spend time thinking about your experiences, challenges, and passions. Journaling can help you uncover deep insights.
Discuss and Share: Talking about your stories with friends, family, or mentors can provide new perspectives and emotional clarity.
Immerse Yourself: Engage in activities that you are passionate about to reignite the feelings and memories associated with them.
Draft Freely: Don’t worry about perfection on the first try. Write freely and honestly, then refine your narrative.

The secret to a standout college essay lies in its authenticity, depth, and emotional resonance. By learning from these successful examples and getting into the right mindset, you can craft an essay that not only stands out but also provides a meaningful insight into who you are. Remember, your essay is your story—make it a piece of writing that you will always be proud of.

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The Economic Theory That Explains Why Americans Are So Mad

Annie lowrey talks about how the affordability crisis is shaping how americans perceive the state of the economy..

[MUSIC PLAYING]

From New York Times Opinion, this is “The Ezra Klein Show.”

I’ve been thinking about this episode for a bit, so I’m going to spend a couple of minutes here, setting it up.

Back in September, the economist put out this interesting model that pulled in a bunch of different bits of economic data, so things like the unemployment rate, inflation, gas prices, the S&P 500. And they used all that to predict how people would feel about the economy. And they showed that from 1980 to 2019. All these bits of data, they do predict how people feel about the economy.

And then the pandemic hits and the model completely falls apart.

By late 2023, the model is looking at low unemployment, it’s looking at falling inflation, it’s looking at a great stock market, and it predicts consumer sentiment. It’s going to be 98 out of 100, 98 out of 100. That is Joe Biden gets his face on a coin territory. Here, in reality, the actual consumer sentiment was 69. That is Joe Biden might lose re-election territory.

There’s been this debate for a year or two now about whether the economy is good or it is bad. And the language of that, the binariness bothers me. It’s like asking if the 19th century was good or bad. I mean, good or bad for whom? Compared to what? The economy is like this vast, multidimensional hyperobject. It’s a little too big for good or bad. I think we need to be more precise.

This debate is not about whether the economy is good or bad. The debate is about our expectations. Given what we’ve seen before, we would expect — we did expect people to be happier with the economy than they are right now, a lot happier. One way you can try to reconcile that is you can say, the public is misinformed or misled.

There’s this Guardian Harris poll that came out a few weeks ago. It found 56 of Americans, 56 think we’re in a recession, 49 percent think the S&P 500 is down this year, and 49 percent think that unemployment is at a 50-year high. For the record, we are not in a recession. The S&P 500 is at a record high. And unemployment is at 3.9 percent, which is extremely low. So factually, people are wrong about the economy.

But it gets weirder than that because when you ask people how they’re doing, they say they’re doing pretty well. The Federal Reserve collects this data. In 2016, 70 percent of Americans said they were doing at least OK financially. In 2018, 75 percent said they were doing at least OK. And in 2023, 72 percent said they were doing at least OK. So that doesn’t look like an economy that people are experiencing in a way where they should think we’re in a recession or at a 50-year high in unemployment. And yet, people are unhappy about something.

So go back to that Federal Reserve report. By the way, if you’re a nerd who wants to read along here, I’m looking at “The Economic Well-Being of U.S. Households in 2023.” On page 10, they have this chart, which shows the main financial challenges people said they were facing in 2016 and in 2023 — inflation, living expenses, debt, retirement costs, medical costs, educational costs, employment. But in 2016, none of those get above percent, and 53 percent of people say they’re facing no real financial challenges at all. So that’s 2016.

In 2023, they ask the same question but get a very different response. 35 percent say inflation is their main financial challenge. 21 percent say basic living expenses. Only 31 percent say they’re not facing any challenges at all. So yeah, people say their financial situation is at least OK, but they also say they’re facing much more financial challenge than they were eight years ago. And they’re very clear about what those challenges are.

So I’ve been working around this big theory of the economy right now. And it’s based on something that got published in The Atlantic in February of 2020, that cursed month right before everything shuts down.

In February of 2020, there’s this big piece on what they call “the great affordability crisis.” And the point the piece makes is that a lot is looking good in the economy — unemployment is down, wages are rising, people are feeling good. But if you look at the things people really need, housing, health care, education, child care, costs have just exploded. Quote, “The spiraling cost of living has become a central facet of American economic life.”

That piece read a little counterintuitively at the time. People felt the economy was great. How could you say there’s a crisis? And people hadn’t been paying much attention to costs for a while. The big problems after the Great Recession had been unemployment, consumer demand, financial fragility. This affordability problem, it was building in the background, but it wasn’t the thing we were looking at.

But then the pandemic hit, and then came inflation. And it was like this portal of salience for prices. Suddenly, all anybody was focused on was prices. The monthly inflation report got the attention that the monthly jobs report used to get — gas prices, food prices, car prices. Then the Federal Reserve begins raising interest rates, that makes it much harder to borrow money, much harder to finance buying a home.

And so the economy reorders itself to piss you off about how expensive everything is all of the time. The price of a cup of coffee is a reminder of the cost of a house, of child care, of a car, of a movie ticket. Maybe you can pay it. Maybe your financial situation is even OK after you pay it. But it doesn’t mean you like it and you’re reminded of it constantly.

What happened is not that the economy is terrible now and it was great in 2019, it’s at an affordability problem was building in 2019, a cost of living problem. Then inflation hit, and it made prices much worse, and it made the cost of living problem much worse. And now, prices and affordability are the part of the economy that people are seeing, and they hate it.

The 2020 Atlantic piece, which has done so much to shape my thinking, it was written by Annie Lowrey. She’s a staff writer at The Atlantic and an economics correspondent. She’s the author of the book “Give People Money.” And a little awkwardly for this podcast, she’s also my wife — or I’m her husband. So you can imagine what pillow talk is like in my home, but there’s really no one for me better to talk about this with. As always, my email, [email protected].

Annie Lowrey, welcome to the show.

Thank you for having me.

It’s a little bit of an odd —

It’s a really weird —

It’s a really weird — It’s also one of the strange things about it is that we’re in a really nice podcasting studio, but we’re sitting like five feet apart from one another. So it has a little like, are we in a legal dispute?

Yeah, that’s a rich person’s Thanksgiving.

[LAUGHS] Exactly.

But unfortunate to have you here because as you know better than other people do, this piece you wrote years ago has wormed its way into my brain. And I bring it up every six months. And it’s become like the way I see the economy.

So 2020, right before the entire world shuts down, you write “The Great Affordability Crisis.” What led to writing the piece?

Both you and I became reporters during the George W. Bush administration. And I was doing a lot of intense beat reporting during the Obama administration. And throughout this entire period, and this is what people are experiencing in the economy, the economy is defined by low growth, low interest rates, low inflation, high inequality. And the primary problem that policymakers are trying and failing to solve has to do with consumer demand, with demand in the economy. The issue is that people aren’t making enough money to buy things.

This entire time, this cost of living crisis is also brewing. And you can even date it somewhat earlier, but I think probably, the aughts are a good place to start it, where the cost of — I identify four things, but there are probably five. These are costs that are big and are sticky, and that you are not transacting frequently. And the four things are health care, child care, higher ed, so higher ed debt, and then housing. And the cost of all four of those things becomes really, really brutal, not just for low income Americans, but middle income, and in some cases, even upper-middle income Americans.

And it really changes our relationship to the economy. And it sneaks up on us again because we’re in this circumstance in which the primary issue is wages and low demand.

You said there was a fifth that you would have included if you’d gone back. What was number five?

Elder care, which is a really, really big issue and has some of the same pressures as child care in terms of wages and accessibility. This is actually becoming a bigger issue as the American population ages.

Why is inflation low? Because housing is going up, child care is going up, the education is going up. So how do prices seem low to people, even as the affordability of basic — the basic items of both middle class life and upward mobility are skyrocketing?

There’s two things that I think are quite important here. So one is that you can have inflation increasing just a little bit more for these items than the overall rate of inflation. And over time, that’s going to lead you to a big problem because if these are large parts of family budgets and large parts of the economy overall, if you have inflation in health care, that’s one percentage point higher than the overall rate of inflation, you’re going to develop a problem really quickly.

The second thing is that our consumer expenditure statistics and our inflation statistics do not take into account the trade offs that people make in order to keep their personal budgets reasonable. So let’s say, as an example, that you would like to live with your partner in a high cost city like D.C., and you’d like to rent an apartment together, but you can’t. So instead, you’re living together in a group house. You probably don’t have a consumer expenditure problem on paper in terms of the amount of money that you’re spending on rent, but you really don’t like the feeling of that.

So I think especially, when it comes to housing, folks, for instance, maybe you’d really like to — you get a great job in LA and you’d really like to live there, but you have three kids and you’re like, I can’t afford that. So you stay where you are. And so your — by being pushed out to a different urban area or an exurb or a suburb, you are probably keeping your spending in line, but you’re probably pretty upset. And cost pressures are still defining your life in some sense. And so that’s why I think that these snuck up on people.

There are two things during this period that are really cheap or maybe two baskets of things. One is things you do buy a lot of. You don’t buy your house very often. You pay your mortgage monthly, but you don’t buy a lot of houses if you’re a normal person. But you do buy a lot of food. You do go to the gas station a lot.

And in this period, consumer purchasing is pretty cheap, right? Things are cheap. You can get a flat screen television for very little money, laptops, smartphones, all these kind of electronics famously come way down. And money is cheap. Interest rates are low.

How much was the cheapness of other things, the cheapness of money, the cheapness of debt, the cheapness of consumer electronics, cheapness of food, creating a sense that prices were under control that allowed some of these other things to go nuts.

Absolutely. So the consumer expenditure that people notice the most — I would say, probably, the two that they notice the most are gas and food. Gas is really important because it’s a throughput. So if the price of gas goes up, the price of other things goes up. But also people, it’s a pretty large single purchase that a lot of folks make every couple days or maybe once a week, and it’ll be like 100 bucks to fill up your tank or $50 to fill up your tank.

And food, folks tend to transact really, really frequently with that. So if you have the cost of stuff that you are purchasing in a store frequently is really pretty low, I think the perception of inflation can be somewhat lower. I think people don’t really think of health care and rent as being really important parts of inflation, but they are because they’re a big part of the overall consumer basket.

So then what connected these four or five categories — health care, housing, child care, elder care, higher ed. Give me a sense of how much prices had gone up, but why in those five? If other things are cheaper, if money is cheap, why is that set of things expensive?

It’s slightly different for each of them. So let’s take housing first, because this is the biggest one and in some ways, I think, the worst one. So housing starts currently are about 1.4 million. It’s a 1.4 million annual pace.

That’s how many new houses were —

Yeah, exactly, how many new houses are getting permitted and are going to get built. We had more housing starts in 1959 than we do now. The population has doubled. And so after the housing crisis, housing starts go as low as like 500,000. And we have a whole decade of depressed residential construction.

So we have decades of under production, and especially, under production in the high cost areas, high wage areas, where most people want to work. So San Francisco or New York are two really, really great examples of this. But we end up having a housing shortage everywhere, and it means people aren’t living where they want to be living, and it means that people are paying a tremendous amount for housing.

So right now, the median sales price for a single family home is six times higher than the median household income. That’s the highest ratio of any statistic that we have. That’s from the Harvard Joint Center on Housing Studies. The number of cost burdened renters. so folks who are spending more than 30 percent of their income on housing, has gone up to a record 22 million households. 12 million American households are spending more than 50 percent of their income on housing.

And so this is a problem that, again, you get over the course of decades. And the cost of housing increases the cost of everything else because businesses pay rent also, and folks need to have wages that cover the cost of housing, right? So there’s that.

Health care is somewhat different. So the health expenditure to G.D.P. ratio in the United States is 17 percent. It’s a little bit less than double the O.E.C.D. average.

So the percentage of our economy that goes to health care.

Exactly. And we don’t have better health outcomes than other countries in the O.E.C.D., we just literally pay more. And so in 1990, the health share of G.D.P. is 12 percent. And it starts just this long, slow climb.

And so there’s actually some good news in health care, which is that the share of G.D.P. that is spent on health care has actually been somewhat flat since the Obama administration. This is great news. The problem here isn’t really inflation, it’s the level. We’re just paying an extraordinary amount for health care.

One of the ways that this is burdening folks is that out of pocket costs controlled for inflation have just gone up and up and up and up and up slowly. So the average person is now paying about $1,400 a year on out-of-pocket health costs. And that’s despite the fact that we have a large share of our population on Medicaid, where out of pocket costs are seriously, seriously controlled.

Yeah, I think of this as the paradox of health care spending, where one way we got overall costs down was we shifted costs onto people. So on the one hand, if you look at health care spending as a percentage of G.D.P., it looks like it is not going up as fast as it was before. And that’s actually true for a bunch of different reasons.

But one way we also got health care cost increases down is to just make people pay more out of pocket. And that does have an effect of getting people to forego both some unnecessary care and some necessary care. But to people, it doesn’t feel like they’re spending less. They are noticing themselves spending more, so they’re pissed about it.

This was always a problem with the Obamacare bending the cost curve idea in the end. What people wanted was to spend less on health care themselves, not for the entire country to spend less on health care. But the way we got the entire country to not see health care costs grow so much was to make people pay more out of pocket, and that makes them mad, not happy.

Absolutely. And the costs are just really high — the costs for surgical procedures, the cost for prescription medication. I’m a type 1 diabetic. I take insulin. Insulin is nine times as expensive in the United States as it is in most of our peers. It is a 100-year-old drug, it is not a new drug. It’s literally 100 years old. Why is it nine times the cost? And I think that we are starting to see some movement towards cost control, but it’s just been really hard in the United States.

So then child care. So child care for zero to five, this is a cost that families are paying for relatively short time in their lives. And it is absolutely, absolutely crushing. Average child care costs for a year are between $18,000 and $24,000 a year. And the problem is not just with how much people are paying, it’s that people don’t pay. A lot of folks cannot afford that. And we do not have enough coverage through programs like Head Start. Head Start is severely underfunded. One in five kids who would qualify for head start, gets head start.

And so folks drop out of the labor force. They rearrange their work schedules. They get family members to help. And the issue is that we have basically maxed out what people can afford to pay, and that still doesn’t mean that child care workers who are among the lowest paid in American life have a living wage. Most child care workers are still making $14 or $15 an hour, it’s just not enough.

And so we just, as a country, don’t spend enough on this. U.S. devotes about 0.3 percent of G.D.P. to early childhood education, that’s less than other O.E.C.D. countries. Another way to think about this is that we have about a 20 to 1 ratio of children under the age of four to child care workers who are aimed at that set. Canada, for instance, it’s 6 to 1. So the issue is that we are not spending enough public money on this to make it affordable, and folks are just paying absolutely obscene amounts.

I had a sociologist on a couple of months ago, Caitlin Collins, who did this great book, looking at parenting and work in a bunch of different countries. And the thing that is seared into my mind is her saying that in Sweden, the cost of child care is capped at well under $200 a month, capped. You just can’t pay more than that. And everybody can get it for that.

It’s absolutely wild. Whereas, here, we’ve said that affordability should be at 7 percent or less per month. Just nobody pays that.

So then there’s higher ed.

Then there’s higher ed. So a really important note here is that folks with college degree have seen really important gains in the labor market. They’ve had higher wage and earnings growth, higher wealth growth than people without a college degree. And so there’s been this long debate about like, is it worth it? And the answer, broadly, is yes.

That said, we have about $1.7 trillion worth of outstanding student loan debt, not all of which will get paid back, but a lot will get paid back. 43 million Americans currently have student loan debt.

Prior to the pandemic, the typical payment was 200 to $400 a month, which might not sound like that much, but is a lot. Add that to rent, add that to whatever you’re paying out of pocket for health care, add that to child care, if you have children, it really, really adds up.

So folks making student loan payments, for instance, they have a lower savings rate for retirement. They have smaller balances in their 401(k)s. They’re likely to delay homeownership because they’re paying their student loan debt. And I think that we’ve started to see a tremendous amount of movement on this. So the Biden administration has given forgiveness to roughly four million borrowers. It’s about $140 billion worth of student loan forgiveness. Nevertheless, this remains a really, really big problem. So these are the four things that I identify that they’ve just created this cost crisis where folks feel like they’re just sprinting to stay in place.

So one of the ways you would frame that piece, that was part of why it struck me at the time, was that everybody was really happy about the economy in early 2020. You have this line up top where it’s like, some of the best years the economy has ever recorded, people are getting bled dry on all these dimensions. If all of that was as bad as you’re saying, and it was, why aren’t people more upset in February of 2020?

There’s a few things. So one is that directionality matters quite a bit. If things are rapidly improving or are falling apart, deteriorating really quickly, that’s going to matter more than a steady state. And here, I think that you are seeing a reversal of some of the trends in wage and inequality that we’ve had for a long time. That’s changing. And I think that people react to that.

The other thing is that the cost of living crisis that I had laid out, it built very slowly over decades. It’s a boiling the frog thing where just extremely, extremely slowly, you start to see all of these things ratchet up. And again, it’s a crisis not of inflation, not of change, it’s a crisis of level at that point.

And so I think that people, it’s less front of mind. The salient things about the economy are the wage gains. These kind of long standing problems are not quite front of mind for people. And things are getting better in a really noticeable way for folks.

I want to pick up on a word you just used, which is “salient,” because this has been — my motivation in this conversation a bit is trying to think about the economy and the politics of it this year, which we’ll get to. And the thing that keeps coming to mind is this question of salience, which is, we can’t hold the whole economy in our head, even in periods when we say there’s a really good economy, it’s bad for a lot of people. Millions of people are in poverty. Millions of people are losing their jobs. Periods where there’s a bad economy, lots of people are starting businesses, people are still getting rich. In a very complicated way, we have to choose what to pay attention to.

And part of my theory of this, having been an economics reporter during that period, is we just weren’t paying much attention to prices. We were paying so much attention to unemployment. We were paying so much attention to wages. We were paying so much attention to inequality. And prices had been really stable in most things for a very long time. Interest rates were low. Most consumer goods were low. And yeah, there were some problems building in housing. We did pay a fair amount of attention, actually, to health care prices. That was a lot of the Affordable Care Act debate. And you would hear people debate higher education prices.

And then the pandemic hits and everything scrambles for a while. And then inflation comes. And inflation makes prices salient. And even now, as inflation eases, that doesn’t stop.

Tell me a bit about how, actually, at this point, you understand the inflationary period we just went through, but also, how you understand the debate about whether or not it is over.

So to give a little bit of a historical perspective on inflation, inflation is really high when Ronald Reagan comes into office. It’s like 13 and 1/2 percent. Then it goes on this long, slow whoosh down through the George H.W. Bush administration. And it’s in a 2 percent to 4 percent range from George W. Bush, Obama, it’s really low, it’s less than 2 percent.

So you have this long period of quietude in which consumer prices, overall, are not changing that much. And the cost of some really important consumer goods, things that people are transacting for on a day to day basis actually go down. Electronics are the most notable example of this. But as a general point, you have this extremely long period of time in which stuff and basic services, things like haircuts or whatever, it’s all really cheap. It’s really, really cheap.

And what happens is in the first half of 2021, we see price increases concentrated among a relatively small set of items in the basket of things that the government looks at to determine the Inflation rate. So energy and car prices go up. You start to see really spiking commodity prices. Then you have this two-year period in which there’s giant spikes in almost everything. Food at home spikes. Food away from home, it spikes. Gas prices go up, natural gas prices, electricity prices. Shelter prices don’t increase in the way that food prices do, but they increase a lot, and they’re so expensive that that really matters. Commodities outside of food and energy go up. So it’s really, really unbelievably broad-based.

And so now, we’ve seen inflation, overall, come down from a 9 percent annual rate to a 3 percent annual rate. But basically, what it did, it was big enough to create this phase shift in prices. And prices don’t really go down. It’s really bad when prices, overall, go down, because it means that people stop spending because why would you pay for something now if you could wait two weeks and the price would drop? I think that there was almost just no muscle memory of it. And folks got really, really, really mad. And the fact that wage gains were enough to cover it, people just didn’t believe it.

How good is our measurement here? How sure are we that the median American or the median working class American has more money, after all their bills and spending today, than five years ago?

I wouldn’t say that statistics are perfect because what an individual family is purchasing and the trade offs that they’re making to keep themselves in budget, it’s really hard to account for all of that. But I would say that generally, our inflation statistics are pretty good. What happens is that we collect prices on a set of items from all around the economy, and then we tabulate them, and we put them into this basket of goods. And then we note the changes in that over time. And we have many alternative measures of inflation.

One thing that I would note is that there’s evidence that the Inflation experienced by lower income families has actually increased faster than higher income families because goods have gotten so much better, and there’s been so much more production aimed at high income families than low income families. So I just want to caveat that. But no, our data is quite reliable, showing that accounting for inflation, families have come out ahead and real consumption has gone up. So the amount of stuff leaving aside prices has gone up.

Inflation is just one statistic. And consumption is just one statistic. And I think that you need to look at a more holistic understanding of what people are spending money on, what they’re getting for their money, and the trade offs they’re making to keep themselves in budget.

I remember talking to the Biden economists when they came in. This is 2021. And they were thinking a lot about how to get to full employment, how to run the economy hot, how to accept the trade offs of running the economy hot, how to get wage gains up, how to make sure you were running at full employment for long enough that wage gains got to the poorest workers, wage gains got to Black workers, wage gains got to Hispanic workers. It’s really fairly easy to get wages up for rich people, but it takes longer in a hot economy to get them up for poorer people. And they actually do a great job in a way on full employment. I mean, it’s amazing that unemployment is still under 4 percent. It’s amazing that wage gains have grown so quickly for the poorest workers. But they don’t really have a genuine basket of ideas early on to say nothing of political rhetoric for what to do about costs. They rename Build Back Better the Inflation Reduction Act. But it’s not really an Inflation Reduction Act, it’s a green energy spending act with some Medicare drug pricing and Obamacare subsidies thrown in.

And this, I think, actually is a fairly big problem. It takes a political system time to adjust to a new set of problems. The player that does adjust is the Fed and begins raising rates, but people don’t enjoy having interest rates go up.

And this gets, I think, to something that Larry Summers and others have been pointing out, which is that our measure of inflation has come down. Inflation tracks how much prices in these different things are going up. But the prices of the things have not come down. And our measure of inflation doesn’t track interest rates. So what people are paying now if they want to get a mortgage, which is much more expensive, if they want to be paying off credit card debt, education debt, any kind of new debt, the price of money is meaningful.

Summers and his team estimated that if you put that into inflation, it goes from roughly, some months ago, 3 percent to 9 percent for people. Do you think there’s something to the idea that actually, the inflation problem isn’t over, that if you’re a family, that because of what you’re paying now for money — you’re paying the high prices of inflation, now you’re paying the prices of higher money, and so actually, to you, it hasn’t really changed that much?

So it’s really important to note, as you did, the cost of borrowing is not included in common price indices. And so in 30-year mortgage rates, they’re close to 7 percent now. The country’s median mortgage rate is just a little bit more than 3 percent. So if you’re trying to get a mortgage now, it’s just blankly unaffordable. You have to buy less house in order to get your monthly price to be the same.

Purchasing a car. About half of folks who purchase a car use financing. And the rates for that are above 8 percent. And so I think that this explains a lot.

I want to go back to something you said, which is that we actually have a tremendous policy toolkit for increasing demand. We can send out stimulus checks. We can do things like sending out child tax credit payments. We can expand the unemployment insurance system. All of these things are things that we did during the Covid recession. And just in general, we can increase the value of the earned income tax credit. There’s a million things that you can do.

On prices, we have a very anemic toolbox. And the problem is that if you have high prices caused by shortages, by things like under-building, a lot of the solutions for that are, A, long term, and B, themselves temporarily inflationary. So if we were going to build a ton more housing in order to bring down rents, if we were like, we are going to solve the housing shortage, we’re estimating at five million units, we’re building five million units, you would create a lot of inflation because that would be just so much additional building. The price of materials would go up. The price of wages would go up. And so I think that we’re in a really tough spot.

So if you’re in the White House, what can you do about inflation? You can release gas from the strategic reserve, which they did do, in response to the Russia-Ukraine conflict. You can do more negotiating on prescription drug prices, which they’ve done. You can do some stuff on antitrust to make companies compete more and to lead to lower prices. But that’s not a really quick fix. And a lot of that is instead going to prevent price increases in the future rather than bringing prices down now. You just don’t have a lot of great options.

And it’s why I think that you’ve seen the Biden administration doing things like tackling junk fees, which are right, there are costs that people pay, and at least, you can get a little bit more traction there. And it’s not, this is not a complete list of ideas and a complete set of things that they’ve been doing. The point is that it’s pretty easy to juice demand. And it’s hard to affect supply and hard to affect prices with the economic tools that we have that are readily there.

Yeah, one thing that’s really striking in the housing market, and you wrote this slightly devastatingly titled piece, “It Will Never Be a Good Time to Buy a Home.” One thing that is striking about the housing market is we turned up the dial on interest rates really quite high by recent historical experience, and prices of homes kept going up. They really show us how bad the supply crunch is, that prices are up, what, like 50 percent over the course of the — since before the pandemic. So now the borrowing cost is much higher, but also the price of a home is much higher.

And yeah, a lot of people have a mortgage from before, but that means they can’t sell because to sell would mean that you have to then buy your new home at this higher price with this higher interest rate. And so also, you have all this supply being kept off the market. The housing market seems really quite broken to me.

And housing, I think, has a pretty outsized effect on how people feel about the future. Young people who are not trying to buy a house right now but want to in the next 5 to 10 years, think about housing. It affects how they feel about the economy, even if they’re not in the market for it right now.

Parents who see their kids not being able to buy a house, that matters to how they feel about the economy. Housing does, sometimes, feel like this master price to me that affects everything. And the level of brokenness there feels quite profound.

Absolutely. Because what’s going to happen when interest rates go down is a bunch of people who have their down payments ready are going to flood back into the housing market, and they’re going to hold prices at the same level or maybe even push them higher. Unless you’re in a world where there’s more supply over long period of time, I don’t see the fundamentals changing, even if prices and levels might go up and down a little bit. We have a very big hole to dig ourselves out of.

The only good thing I can say about it is that you have a lot of political figures who really care about this now, and you have both blue state and red state governors who are really starting to take this seriously. For the first time since I’ve been a policy reporter, you have folks starting to say something like, how can we get everybody on the same building code? What can we do to create carrots and sticks so that places will allow dense construction? And we didn’t have that for a really, really long time.

I actually remember, after the housing crisis, when housing economists started to say, we’re underconstructing. And I remember, at the time that they started to say that, being like, what is wrong with you? What are you talking about? How could this possibly be an issue? But they were completely correct, because the problem actually started before the housing crisis. In some cities, we start underconstructing in the 1970s.

So you have prices way up, basically, on everything now. So prices went up for every good. The affordability crisis set of prices has been up and went even higher post-pandemic. The price of money is way up. And at the same time, you have this debate about whether or not the economy is really great or something is missing. You have these measures, these predictions of what consumer sentiment will be like, given an inflation rate and given an unemployment rate. And they show consumer sentiment should be really high if it is tracking historical trends.

You have this endless back and forth about, well, on the one hand, people say their own personal financial situation is pretty good. On the other hand, they say that the national economy is really bad. People seem to think we’re in a recession, but they don’t look financially like they’re in a recession.

Why has there been this sense of confusion? We’re laying out this whole theory of prices. It just looks really bad. And on the other hand, a lot of economists have been scratching their heads over why people are so upset. So what accounts for the head scratching response?

We’ve talked about this, but I think it’s important to stress. Wages have gone up more than prices, and that is particularly true for lower income folks. So if you are in the bottom decile of earners, your real wages, so wages adjusted for inflation have gone up 12 percent since 2019. If you’re in the highest decile of folks, it’s just about 1 percent. So real consumption, meaning, consumption holding prices constant has increased about 10 percent over the past four years. We are buying more stuff.

And if you look at levels of — measures of material hardship, those have been going down. And that’s not to say that there aren’t problems. I also believe that inflation, A, it was kind of a surprising change for folks, and B, there are some economic facets and behavioral economic facets of it that make people particularly angry about it.

So one is that unemployment is absolutely devastating for the folks who experience it. But even in an enormous, terrible recession, perhaps, 1 in 10 folks who wants a job will be unemployed, whereas inflation affects literally everybody. In an economy, and when I talk to people, inflation is much more pernicious for lower income folks because they’re really spending every dollar that they have on basic necessities, and for higher income folks, that’s not true. But you can talk to really rich people and they will be mad about inflation. They are mad about how much they are paying for things. It’s just universally enraging to people.

And there’s this perceptual problem. So the economist, Stefanie Stantcheva, who is at Harvard, who has found that Americans believe that their purchasing power is falling in a world in which there’s a lot of inflation. About four in five respondents to this survey that she conducted said that prices systematically increase faster than wages. That means nobody’s really getting ahead. This is not true, but this is what people think, real consumption and real wages are up.

And her polling also shows that folks blame corporate greed. They blame Washington for inflation. They don’t see it as a function of input prices, energy costs, supply shortages, rising wages. And they also don’t see inflation as part of any kind of an economic trend that’s positive, including their own wage gains, even though their own wage gains are partially a product of inflation.

I want to hold on that. How does somebody experience a wage gain? Your boss calls you into the office and says, we’re giving you a 6 percent, a 5 percent, a 7 percent raise. You’ve done great work. Thank you for everything you’ve done. Or you go look for a job and are able to bargain a higher salary than you were able to do before. That feels like something you did. I got a good raise.

And inflation feels like something happening to you. I got this raise. I’m making $2 more an hour than I was. And inflation is eating 80 percent of that. Inflation is a bad thing happening to you. And wage gains are a good thing you did. And the fact, frankly, that any of your wage gain is getting eaten by faster than normal inflation or prices that you have not in any way adjusted to, it’s really maddening.

Absolutely. And look, the reason that interest rates are so high right now is to get inflation down because inflation is economically destabilizing when it’s too high, and it’s socially destabilizing. This is really well known. And again, you can tell people over and over and over again that they’re better off, but if you have inflation rates at 9 percent, people aren’t going to listen to you. They don’t like it. They don’t want to have to do mental math every time they go to the grocery store.

And when I talk to people about why they think the economy is bad, the first thing that people say to me, often, is, lunch at Chick-fil-A is $15. And lunch at Chick-fil-A being $15 is neither here nor there in the grand universe of what people are earning and paying for, but it’s a price that people notice, and it really ticks them off. The other thing is inflation has come down. It’s going to take a while for people to believe that. And one thing that I do think is changing now is that you are starting to see companies really start to compete for consumers on price. So both Burger King and McDonald’s have set out these $5 value meals. And Target said that it’s cutting prices for 5,000 frequently purchased items — things like diapers, and cat food, and dog food.

And we’ve been in this million, which prices just feel like they go up, and up, and up, and feel people feel like they’re not getting a break. And already, you’ve seen consumer sentiment start to tick up. And I think that companies engaging in price wars will actually have a pretty profound effect for as long as it sticks around for.

How much do you think the high prices of the small things act as a constant reminder of the high prices of the big things, which is to say, in a world where you know that health care, and housing, and education are incredibly expensive, how much does the fact that Chick-fil-A is $15, that a cup of coffee is $7 act as this constant salience portal to keep you thinking about this thing that is making you mad all through the economy?

I think this is really important. So let’s say, as an example, the average American adult makes a purchase two or three times a day. And some people make purchases way more frequently than that. And a lot of families make purchases less often. They get gas once a week. They get groceries once a week and maybe a few other little things.

And so if two or three times a day, you are being reminded of the fact that your money is going less far than it used to be, I think that you’re going to be pretty angry about that. So one in three Americans eats something from a fast food restaurant every day. And about two in three Americans eat something from a fast food place once a week. It’s just really, really, really common. And the prices for fast food went up a lot. And I think that that contributed quite a lot also. Americans are currently spending more than 11 percent of their income on meals. That’s the largest share since the 1990s. So I think a lot of this is about food and restaurant costs going up quite sharply.

Between the summer of 2021 and the summer of 2022, grocery store prices go up nearly 14. And the cost of some grocery store staples — so dairy products, things like sugar and oil, cereals, it’s more than percent. And so I think that for high frequency items, all of a sudden, you just get this blasted in your face again and again and again. And even if you’re not spending that much overall on these things, I think it’s basically just tapping your shoulder over and over and over again and saying your money is going less far.

Whereas, even something like rent, which people complain about and talk about all the time, but it usually gets set once a year and you pay it monthly, so you’re reminded of it less frequently, even though that’s a much bigger line item on the budgets and fundamentally, I think a much more problematic part of the economy. And notably, rent goes up a tremendous amount during the pandemic. It’s a nightmare. It was really expensive. It’s even more expensive now.

One of the things that economists will say when they’re pushing back on the idea that how people feel about the economy is merited, I think that’s actually the right word for this pushback, is, look, if it was so bad, people would be changing their behavior more than they are, that people are still going out to eat a lot, they’re still buying a lot of food out of the house, that we see what it looks like when people are under very high levels of financial stress. And they make different decisions. Their consumption patterns change really radically. If you lose your job, you don’t keep spending in the same way.

But my sense from them is the consumption data has been pretty stable. And that has been a confusing thing to economists in this period. Inflation should lead to a lot of changes in how people act. It’s not led to very many changes in how people act, but it has led to a lot of anger from those same people. First, is that true? And second, how do you read the both reality and politics of that consumption data?

So if you have price increases and just cost pressures within families, folks tend to make some pretty predictable responses. So one is that they purchase fewer items per shopping trip or they might reduce the number of shopping trips. So folks have not really cut the number of shopping trips much, but they have reduced the number of items that they are purchasing when they go get consumer packaged goods.

The second is that they’ll trade down. So you’ll go for Kirkland rather than Pampers. You will go for Aldi rather than Wegmans. You’ll go camping instead of going to Disney. And folks are doing that. But the main way that consumers have responded is just by paying higher prices. And you can actually go back and look at company earnings calls. The corporate executives themselves are like, well, we kind of keep on testing the water and we’re not seeing much effect. So we’re going to keep on pushing prices upward.

We’ve not seen a dramatic pullback in luxury goods shopping, or travel, or jewelry, all of those things that you would expect to be the first to go because people give those up and they keep on purchasing food. People are just mad about it, but they kept on paying. I do think that that has changed a fair bit recently.

So one is that we’ve started to see a really big increase in credit card balances and an increase in delinquencies. And so that’s some evidence that lower income consumers are starting to get stressed. And they’re putting things on their credit card rather than being able to pay for them themselves. And again, we’ve also seen these companies be like, OK, we’ve tapped out, we’re going for the value meal. We’re going to try to get consumers an increase foot traffic by competing on price.

And so it’s important to note that the costs for big box stores, for fast food restaurants, you’ve had a really big increase in labor costs. You had a lot of big increases in input costs. And both of those things have calmed down. But I do think that we’re in this period where probably, this is as much as folks can safely spend.

You mentioned a minute ago those corporate earnings calls, where C.E.O.s would be like, look, we’re raising prices, people are still paying it. We’re going to raise prices again. One of the more popular explanations among more left-leaning people for inflation was what got called greedflation, which is, there wasn’t really a problem here, except that corporations were taking advantage of a weird moment in the economy to do huge markups. Was the greedflation theory correct or how do you understand that part of it?

I certainly don’t think it was the only thing going on, if it was part of what was going on. The cost of labor really went up. It started going up when you started to have increases in local and state minimum wages, which begins during the Obama administration. Then you have a really big increase in wages for lower income workers that starts around 2018. And the pandemic actually intensifies it quite a bit. So there’s that.

And then input costs go up too. And so the way that companies are going to respond to that is by passing that on to consumers. I do think that there was a moment where companies basically thought that because of inflation, they could increase prices even more, and in this miasma, people would pay it. But I don’t think that it was exclusively corporate greed. I would note that corporate bottom lines are looking pretty good right now, despite the fact that you have really high interest costs and these increases in costs more generally. So I don’t think it was the only thing.

Sometimes, I think the problem with the greedflation thesis was simply the name. Greed made it sound like they were doing something evil, when what corporations do naturally is try to find the price at which they can balance market demand and the highest profits they can possibly make. But it was true that there was more room for them to raise prices than I think they had thought in 2020. And things that you might have thought would happen, like really intense comparison shopping or intense use of coupons didn’t happen.

And it does seem to me that one thing that occurred was a step change reshuffling of prices. And now, consumers are stressed enough that you’re beginning to have price wars bringing things down in certain areas. You mentioned Burger King, for instance, and Target trying to think about how to bring in more budget-conscious consumers.

But there was this period where they’re pretty open about this on earnings calls. And I don’t think the right way to understand it is greed. Corporations trying to earn profits is what corporations do. But it turned out that there was a zone of price increases you could inflict on people, where instead of them changing their behavior, they would get really mad. And that feels to me like the economic zone we’ve been in for a little while. The person paying the cost on this is Joe Biden, not Target or Walmart or McDonald’s, but people are mad about it. It’s just like, the corporations actually did this adroitly enough that they didn’t lose a lot of demand, they just pissed people off.

There is a really interesting raft of studies that has come out in the last five years from economists that show that American consumers have gotten less price-sensitive. So when prices shift, consumption doesn’t shift like we would expect. It doesn’t shift like it would used to. And these studies are mostly looking at consumer packaged goods, consumer goods.

So other ways that we think that households have become less price-sensitive, people are using fewer coupons, they’re spending less time shopping and comparison shopping. So why might this be true? One is just that stuff is cheaper, thanks to globalized trade and manufacturing advances. The second is that people are wealthier. So you’re just less price-sensitive when you’re richer.

Third is women in the workforce — so it used to be much more common for one partner to work and the other to spend the money. And so you would probably have that time, it would be part of your job as a household worker to comparison shop. But now, given that so many prime age women are in the workforce, there’s less time for them to do that. Consumers seem to have gotten more brand loyal is part of this, that’s one theory.

And another theory is that it’s just inertia. People have gotten older. And they tend to have this inertia that they will be less likely to try new things, buy new things as they get older. And so you just always buy the Starbucks coffee, so you’re going to keep on getting the Starbucks coffee.

I also think there’s some chance that targeted advertising and dynamic pricing has something to do with this, but I don’t know. It’s just a really interesting shift that I’m not sure that we completely understand and completely understand the implications of yet.

I want to shift then into the macro politics of this. And I want to separate two pieces of it, which is how people feel about the economy and how those feelings about the economy translate into politics. But one thing that you’ve been doing pieces on for many years now is the rising way in which partisanship shapes perceptions of the economy. Tell me a bit about that and how it might be playing into this period.

So there’s something called the Partisan Economic Expectations Gap. And basically, what this shows is that if you are a Democrat and there’s a Republican in the White house, you’re much more likely to think that the economy is bad. And that’s true, even holding economic conditions constant.

And the flip is also true. This happens for both sides. It’s not an asymmetric thing. If you’re a Republican and Joe Biden is in the White House, you’re like, this is a terrible economy. We need that guy Donald Trump back.

And this had the effect of somewhat divorcing folks opinions about the state of economy from the real state of the economy because it’s become so political. It has also narrowed the band of consumer expectations because people are not changing their minds about anything anymore. You just have way more strong Democrats who say, economy is good right now, and way more strong Republicans who say that it’s bad. This is happening at the same time that we have growing evidence that real economic data might be less predictive in elections than it used to.

But one thing happening in Joe Biden right now is that you do see this huge partisan economic expectations gap. But also, Democratic views on the economy are not as positive as you might think if you were taking that model from a couple of years ago.

There’s something weird happening among the Democrats. They’re not giving Joe Biden the economic pass that you might expect from what we’ve seen in that data before. Why do you think that is?

There’s two answers, and I don’t know which one it is. One is that they don’t really like him. Joe Biden is a somewhat less compelling politician for Democratic partisans than some other folks are in terms of his ability to stir the electorate and increase things like turnout. I think he’s a somewhat less vigorous campaigner than we’ve seen. And I think that he has somewhat lower favorability ratings and higher unfavorability ratings among his own partisans than we’ve seen in the past.

The second is that inflation is hitting them, and they’re just subject to the same forces that everybody else is in the economy. So Democrats are somewhat clustered more in the Northeast than on the Western coast, where you’ve seen really large increases in specifically, housing costs. But then you’ve seen urban housing costs go up everywhere. And so to the extent that we have all of these blue islands, that’s exactly where the prices have gone up, and it’s been really, really, really pretty bad.

That said, I do think that over the past, call it 10 years, you’ve started to see the housing crisis spread to communities that we would never think of as having won before. Rural areas, you’ve seen really dramatic increases in housing costs. Ex-urban areas, you’ve seen dramatic increases in housing costs. It’s everywhere now.

I would note that the mediating influence of the news media probably matters here quite a bit. So we know that holding economic conditions constant, media coverage of the economy has gotten more negative. And it’s especially more negative in social media where a lot of folks are now getting their news.

And I don’t think that that’s entirely the fault of journalists. People seek out bad stories, that’s what people want to read. So these are all headlines that have come out recently about household financial health and consumer spending — Americans keep on spending, but big retailers doubt it’ll last, Slump in big purchases clashes with government’s strong consumer data, Americans are still spending like there’s no tomorrow, Americans plan vacations even as they sour on the economy. These are all great stories. I’m not picking. These are all great. They’re really, really sensitive and really well-reported.

Does this media explanation actually feel true to you? Because here’s what I have experienced, as a person who writes about the economy, is married to a person who writes about the economy, and works in a place full of people who write about the economy, what I noticed happening was there was all this very sunny coverage of the economy, and everybody doing it was getting yelled at.

You write something about how the economy is actually looking really strong or we’re avoiding that recession or something. And people just got slammed by their audiences. They got slammed as out of touch. I don’t want to blow up your spot here, but you’ve written some pieces saying like, this economy’s actually pretty good. My sense is the reader feedback on that can be spicy, sometimes.

And I feel like the media got whipped by its audience a little bit into taking at least, some portion of the audience’s economic experience more seriously, which I’m not saying is a good or a bad thing, I think it’s a complicated thing. But it isn’t my impression that the economics reporting profession wanted to be negative on the economy. It’s that when they started covering the economy positively, what they heard from their readers or viewers or whatever, and then what they saw in the polling data, how people actually felt about the economy, was that people were not experiencing the economy positively at all.

I’ve seen the media in periods when we want to cover the economy negatively because the data is really negative. And that has not been what I’ve noticed happening here. In fact, I see a lot of stories about why aren’t people happier, given all this good economic data? And then all these people yelling at the author of those stories, explaining why it is that they’re not happy.

I think that people’s understanding of inflation is not economists’ understanding of inflation, which is something you were just trying to. I think it is real that people feel extraordinarily taxed by high prices. And the fact that the prices have only gone up 3 percent, they just went up 10 percent. I really credit that because I think that people are experts in their own experience. And I think what people are experiencing is really, really important.

Nevertheless, it feels to me important to point out that inequality dropping, that’s amazing. Declines in child poverty, that’s amazing. This is going to sound, perhaps, simplistic, but we have a gigantic economy. We’re not like Germany, where the entirety of the E.U. And so there’s just always a lot happening. And it can be hard when you’re doing these big gestural stories about the big headline statistics. You’re constantly missing things that are happening in this really vast, really, really, really diverse, really politically diverse, racially diverse, ethnically diverse country in which there’s really, really big problems.

People are allowed to be mad at stories. And I think you just have to hew to the complicated economic truth of any situation. It’s why I actually think that a lot of those headlines are correct. But I think that that leaves a lot of space for people to read in their partisan priors or read in their view of things.

I want to go back to another explanation you offered a second ago, which is the question of whether Democrats like Joe Biden enough to look at the economy through their feelings about Joe Biden. So I’ve been thinking a lot about 2012 and going back and looking a lot at the 2012 data. And I think just inarguably, the economy was just much worse in 2012. I mean, unemployment in May of 2012 was 8.2 percent.

8.2 percent, really bad.

I remember covering the monthly jobs report in 2012, and just I assure you that economic coverage in the media was much more negative then. And Barack Obama was leading Mitt Romney by two points in the real clear polling average. So you have a much worse economy and you have the Democratic incumbent leading.

And the way that the economy figures in to politics is not a one to one like, I like the economy, so I like the incumbent. That’s not how people think about it. You often have incumbents governing in an economy that is recovering from something bad happening to it. That was Reagan in 1984. There had been this big recession, the Volcker recession in ‘81. Reagan and Republicans have a really bad midterm election in 1982. But by ‘84, things are kind of getting better. I mean, they’re worse than they are now — unemployment is higher, inflation is higher, the interest rate is higher, but Reagan makes a morning in America argument. And people credit him with a comeback that they feel is happening.

In 2012, the economy is quite bad, but Obama is making this argument, it’s made very aggressively at the convention that year, that the entirety of the financial crisis wasn’t on him, obviously. And he’s a smart, thoughtful guy who cares about people like you. And he’s got the best economic people around him. And Mitt Romney’s a plutocrat. And you should trust Obama to manage a comeback. And that’s ultimately a winning economic message.

And the thing you’ve been seeing this year, I think, is people not, as of yet, at least, being willing to extend that trust to Joe Biden. When you ask them, they say, they trust Donald Trump on the economy more. But just in general, I don’t think that the argument the administration or Biden himself has been able to make, at least, in enough forums that people are seeing or hearing it, is giving people a sense like, yeah, this guy has it under control. I’m not even sure liking or disliking is the right way to think about it, it’s the has it under control dynamic.

Donald Trump’s pitch is, the economy is good when I was president until the pandemic hit, and I’m a strong man who will jawbone the prices down and cut good deals for you and something, something, something. And Joe Biden’s pitch, I think, has been a little bit more complicated, but also, just the impression he gives off due to age and maybe the way they’re campaigning is a little less energetic. And that feels to me like it is mattering here.

Obama wins at a time that you have a housing crisis that creates a global financial crisis. And I think that we, sometimes, forget that the first domino, the first big thing that happens is you have these dramatically elevated property seizures between 2007 and 2010.

Yeah. So you’re saying he wins in ‘08 this way.

Yeah. Exactly. 10 million families lose their home. 10 million families. He comes in. And George W. Bush and his administration own that. Obviously, the American Reinvestment and Recovery Act is way too small. There’s some questions about whether he should have pivoted to the A.C.A. or not, and I don’t know about the counterfactual there. But by 2012, things are getting better pretty significantly.

And Mitt Romney, notably, he’s like a fancy finance guy at a time that inequality is really, really high, and inequality is the problem, and rich families are rebounding and low income families aren’t. And so Obama is able to make this pretty compelling case. Do you want the bain guy who laid a bunch of you off? Do you want him running the White House? And that economic argument makes sense.

I think that personalities matter here a lot, right? Obama was like a once in a generation political talent who was extraordinarily good at campaigning. For folks who didn’t get to see him, he was magnetic up there. And Joe Biden right now is just a less vigorous campaigner. Donald Trump, I think, just has he’s unusual in running to unseat an incumbent in the sense that he was president himself. It’s just a strange election in that way. And he’s also pretty good on TV. He’s a celebrity. And I think that he’s been capable of making this argument of, yeah, it was better back then, even though I’m not even sure that it was.

So Biden gave an interview to CNN a couple of weeks, a month ago, something like that. And it was very much an economics interview. So why don’t we play the way he’s messaging this?

Economic growth last week, far short of expectations. Consumer confidence, may be no surprise, is near a two-year low. With less than six months to go to election day, are you worried that you’re running out of time to turn that around?

We’ve already turned it around. Look at the Michigan survey. 65 percent of the American people think they’re in good shape economically. They think the nation’s not in good shape, but they’re personally in good shape.

The polling data has been wrong all along. How many of you guys do a poll with CNN? How many folks you have to call to get one response? The idea that we’re in a situation where things are so bad, the folks — I mean, we’ve created more jobs. We’ve made — we’re in a situation where people have access to good paying jobs. And the last I saw, the combination of the cost of inflation, all of the things, that’s really worrisome to people, with good reason. That’s why I’m working very hard to bring the cost of Reynolds down, to increase the number of homes that are available.

But let me say it this way, when I started this administration, people were saying there’s going to be a collapse in the economy. We have the strongest economy in the world. Let me say it again, in the world.

What do you think of that?

As a reporter, I don’t argue with people’s perceptions of how things are. But I think it’s a political problem that he and other Democrats have run into. They feel like they’re being gaslit, if you say, well, you’re coming out ahead. That’s just not how people feel.

I am not a person who thinks a lot about political messaging, but I’m not sure that the Biden campaign has hit on the economic message about how it’s going to be better tomorrow. That is really resonating with folks.

I was struck when I saw that interview because that interview took place in an economic setting, I forgot, it’s like a factory or something. So they clearly had set it up to be an economic interview. And the question that Erin Burnett asks there is extremely obvious, right? Put anybody in that interview chair, you’re going to get a question like that about the economy.

And I don’t want to say Biden didn’t seem ready for it, but he didn’t seem to have an answer ready. There are a couple different answers happening in that answer, and he’s not really settled on one. There’s the — actually, we have the strongest economy in the world, which is true. I mean, in a lot of ways, you look at America compared to other countries right now, and we look great. We look way better than China, which is not true for a while. We look way better than the countries in the European Union. We look way better than the UK.

There’s also the, actually, this has all turned around and you all just haven’t felt it yet, very, very complicated case to make. He goes on to make some points about trying to crack down on junk fees, that kind of thing. What I heard there was, they haven’t decided how to message this.

The other thing is that they don’t really have a big policy package here. It’s a weird thing. You can imagine a world where the Inflation Reduction Act was actually an Inflation Reduction Act. They just renamed something else, the Inflation Reduction Act. And the stuff that got cut out of it by the guy who helped, I think, rename it that, Joe Manchin, was all the stuff that actually might have brought prices down for people, all the stuff that focused on things like child care.

And so if you ask like, what is their big package? What is their headline policy on affordability? There are certain things they are touting that they’ve already done, like Medicare prescription drug pricing, which actually did bring down the price some people pay for some drugs, junk fees.

The insulin price cap, really, really important.

Really, really important. So they — it’s not an accident, I think, that the couple of policies they have that actually brought down the price of something for someone are very central to the reelection campaign. But I don’t think they have had a very clear set of, here are the big things we intend to do on that in term two. If you’re not happy with how things have turned out, you don’t just have to wait. What you need to do is give us the House again. This is the big project here. And here’s what I’m going to do to achieve it.

Absolutely. So it’s pretty hard for them to get prices down. You’re just going to have to have subdued inflation for a while for people to feel good in the grocery store again, feel good going out to target or wherever they’re shopping. There’s a lot of room to really improve the fundamentals of the economy for people by attacking the cost of living crisis.

Health care costs could go down quite a bit. It’s really hard. It’s really, really, really tough. But I think if you made an effort to get premiums and out-of-pocket costs down by instituting price controls, allowing the government to negotiate for prescription drugs, there’s a million different ideas for how to do this. That could be super powerful.

Getting rents down, increasing housing supply, that is going to have a lot of benefits for the economy. Again, it’s going to mean more construction, which is going to be inflationary. There’s tremendous space on child care. It’s really popular when states and cities do 3K and 4K, which a number of places have done now. If you had a comprehensive zero to five plan that had the government come in and basically say, you don’t have to start at five, we’re going to help you starting at six months, that would be great.

And they’ve already had a lot of traction with student loan debt. And I know that there are concerns about the distributional effects of that, but it is quite popular because I think people see the whole system as being screwed up.

Although, polling doesn’t do that well.

Yeah. I mean, it’s popular for the people who do it. And I think that it was polling that led them to do so much on student debt, right? And again, I think people’s perceptions of things are kind of wishy washy, but I think that that can advantage politicians. Whether you can pass any of that through congress, I don’t know. It’s really, really hard. A lot of what we’re talking about would be expensive, but there’s definitely space there.

How about Donald Trump? So I’ve watched some of his rallies around this. And he talks a lot about how expensive everything is, talks a lot about how much it all costs. I wouldn’t say, he’s got an articulated agenda that will bring price decreases, but to the extent you understand what the Donald Trump second term economic agenda is, is it inflationary? Is it deflationary? What are the big ticket items? How would you say he is saying he would handle this?

It’s pretty inflationary. So tariffs are inflationary. If you wanted to lower costs, you would just eliminate tariffs. But tariffs are a big part of his economic package. Immigration is not necessarily an issue that I think people think of economically, but in a world where we have more folks who have immigrated here, and wages are still going up, and you don’t have that sense of low wages being a function of people who got here and didn’t stand in line like they should have taking money away, I don’t know.

I think agricultural communities have also stressed the importance of immigrants to our agricultural workforce.

Mass deportation would be hugely price increasing.

Yes. We’ve had agricultural communities, we’ve had construction companies note that absent labor provided by immigrant workers, they wouldn’t be able to do what they’re doing. Costs would go up. And we would throttle production there. I don’t think it’s the most important thing, but this would be inflationary. The cost of food is going to go up a lot if you’re having tomatoes and berries dying on the vine in California because there’s nobody there to pick it. Disrupting those parts of the economy would be really, really damaging. And again, I think it’s important to note that that is, in my mind, less important than the emotional and moral cost of trying to do something like this.

I think, sometimes, the response you get from Republicans on this, or you did, at least a couple of years ago, is, well then, they’ll just pay American workers more.

Unemployment rate is below 4 percent? What workers are you going to get to do agricultural work? This is why we have so many folks from other countries doing agricultural work here to begin with.

Same thing with construction. Construction is really hard work and it takes a lot of skill. You’re not going to snap your fingers and have millions of Americans start doing roofing work in Florida and Texas in the sun.

Well, you just said about tariffs being inflation, I think, is important. And it struck me that Biden just unveiled a huge set of new anti-China tariffs. We’re not going to allow these cheaper Chinese electric vehicles in here. But his tariffs on a bunch of Chinese goods, which, on the one hand, I get the politics of, you want to take an issue away from Donald Trump. They do have genuine economic and national security concerns about rebuilding certain kinds of supply chains and manufacturing capacities in the U.S..

But at a time when you have a lot of focus on prices on the one hand and climate change on the other, jacking up the price on Chinese-made electric vehicles and solar panels and things like that, from a policy perspective, you are making things more expensive, which struck me as surprising at the moment.

I think that the issue here that I see is not even really exactly an economic one. It has to do with their own energy goals. If we are going to have a transition to green energy, it’s going to be tough to do that with policies like these.

In terms of increasing American manufacturing capacity, I think there’s now a widespread understanding that it’s good to make some things here, and that not making them here leaves us really, really vulnerable. So in terms of the supply of some critical drugs, we had some really bad issues with formula and formula importation. So I think that that is true. And again, manufacturing jobs have this nice spillover.

But with China, yeah, it’s tough. And I think that this is happening for national security reasons, perhaps, more so than economic reasons. And I think the real question there is about how that would fit in with a broader energy policy.

But isn’t there some way in which if people could start buying whatever these are, $15,000, $20,000 Chinese-made electric vehicles that are popular in the rest of the world here, they would experience that as nice, right? I mean, it would be nice to be able to get a good electric car for a lot less money than you can currently get an electric car.

I take some of the set of affordability crisis and price crisis problems as the revenge of neoliberalism. I mean, the neoliberal trade was you kept prices really low. I mean, neoliberalism in many ways is a dominant economic orthodoxy emerges out of the inflationary crisis of the ‘70s. And you keep prices low. And it turns out, that also kept wages pretty low, which is a real problem with it.

The Biden administration has been extremely clear that they are the end of neoliberalism. They are the Democratic administration making a turn on neoliberalism. It’s really the break between them and the Obama administration economically. And so what are you getting? You’re getting the other side of that bargain. You are getting higher wages, but you’re also getting significant higher prices.

And I mean, on one level, I just don’t think they figured out the politics of that. I don’t think they were prepared, not that their policies are the main thing that raised prices, but they definitely don’t have an economic story of like, why paying higher prices is a good thing in some of these areas?

And on things like the Chinese electric vehicles, I mean, I’m very uncomfortable with that policy. I understand the reasons you might want to have a domestic electric vehicle manufacturing chain. I agree with them, in many ways, but you can pull in Chinese manufacturing here. But if you want this E.V. transition to happen quickly and you don’t want people to hate you for it, you need really cheap electric vehicles. And China knows how to make them, and frankly, we don’t.

And you listen to Donald Trump at a rally, and he is going directly at this. He’s like, you’re going to hate these electric vehicles. They’re too expensive. He sees this as like a coming problem. And I don’t know, I think Democrats are about to get caught really flat footed here because on the one hand, they’re cranking up the regulations on electric vehicles, and on the other hand, here’s China willing to sell us a bunch of cheap ones. And we’re like, no, no, no, no, no. We’ll take the expensive ones.

And I’m not saying I don’t hear the rationale, I do, but they’re acting like there aren’t trade offs here. And I think the trade off is going to be politics. I don’t think the policy is going to be popular.

I would isolate cars for a second. And I would think about the neoliberal trade that you are describing, more in terms of domestic labor costs. So for a long time, the cost of fast food and Walmart stuff, part of the reason that prices were so low was that wages were so low. And now, we’ve seen this shift to more European style pricing, where the prices are up a little bit, but the wages are pretty good. And you can start to see families getting by with these jobs.

And I would note that the wages are still way too low for a lot of these jobs. I really worry about delivery drivers, folks who are doing Uber Eats and that kind of thing. But I think it is fundamentally a trade that would be better if big block prices were higher, but all of the wages were higher. And again, we’ve seen really significant wage growth in those jobs. And I think that that’s good. I think people might not like it fundamentally, but I think that that would be, overall, a good trade. On the electric vehicles issue, cars are expensive. People don’t buy them that often. The differential in cost between what we have here in the United States right now and between what China is producing is really, really significant. And so I would almost see it as its own little special issue. And I feel like I just don’t understand the foreign policy implications and the national security implications enough, because it seems to me, again, that those are somewhat predominant.

The reason I do connect these a bit is it feels to me like they reflect an unformed politics of prices, that the Democratic and Republican coalitions knew how to talk about the problems of demand, of jobs, of wages. They knew what their policies were. Republicans wanted to handle all this through tax cuts. Democrats want to do more stimulus. They want to do minimum wage increases, et cetera. And I think neither side is very clear on what they want to do about affordability. It’s harder. It splits your coalitions in weird ways. It has all these cross-cutting elements with other things, like the energy transition.

And the reason I think the Chinese tariffs and E.V. issue is tricky for the Democrats is that on the one hand, it shows the way some of their goals, like, don’t let manufacturing communities in the Midwest be hollowed out, don’t be too reliant on China, conflicts with other goals, which is like, you need to have something to say to people about how you’re going to get them cheap things again.

And Donald Trump and the Republicans are not better. It’s word salad. I think you see some governors who do, like Jared Polis in Colorado. You listen to that guy talk, it is just cost of living, cost of living, cost of living, cost of living. But I do think something you just really hear on both sides is that the economic problem they are facing and that is salient to the public has changed faster than they have changed. They’ve left a lot of this up to the Fed, frankly.

And in terms of really having a message on what we are going to do, and we are laser-focused on this, and we have 50 ideas for what to do here, you don’t hear that kind of talk. It’s not being treated as a kind of policy-amenable problem in the way that low demand was 15 years ago.

I think that you are going to see mean reversion on prices and consumer sentiment. I think that with inflation below 3 and 1/2 percent where it is right now, things will normalize. Supply chains have readjusted. Wage growth has come down to a level that I think is more normal. And so if I were a political consultant, I would worry about fighting the last war a little bit.

I’m not sure that you need to do too much on consumer prices, given that the supply chain disruptions and everything else has evened out. I think there’s tremendous space to do a lot on the cost of living crisis. And I think it would be pretty popular. And I think that you could focus on child care, health care, housing.

Right now, we really do not have a national housing policy. And in part, that’s because housing policy is mostly left to state and local governments. HUD is teeny tiny. It’s teeny tiny. And it hasn’t gotten bigger as we’ve had this housing crisis.

HUD being the Department of Housing and Urban Development.

Housing and Urban Development. They do very little housing and very little urban development. It’s almost exclusively the purview of state and local governments. But we’re really just starting to think about how the federal government could start increasing housing supply.

So I think that in the longer term, all of these things — these are still going to be problems for folks 5 years, 10 years from now. And I actually think that the fact that you’ve had this bending in the health care cost curve, there’s space for, yeah, let’s start getting drug prices down. Doctors and nurses, cover your ears. Let’s allow more of them in and allow more competition so that in the long term, you can have lower wages for them. It’s very, very, very unpopular, but that would probably be good. Let’s increase health care supply, but let’s just get the prices down for all of these things. Let’s rationalize this completely irrational system. Is that good on a bumper sticker? Does that win elections? I’m not sure about that, but it’s good policy.

I try to take your point about mean reversion, but I do think there’s a thing in politics. This is what people are worried about now. And they all have to run this year. And there’s something about being caught trying and being caught worrying.

You want people to feel like you were upset about the thing they are upset about. And if you’re the person in charge, you’re working really hard on the thing they’re upset about. I have this slightly strange view on the politics of Israel-Gaza, which is that I think the main way it is going to damage Joe Biden is not a revolt from the left on Gaza, but just a generalized sense among voters who actually don’t care about it that much. If you look at like a list of issues they think are important, like Israel and Gaza are extremely far down there, is that the feeling that Biden and the Democrats are paying all this attention to wars over there and not doing anything about the cost of groceries over here.

And to some degree, I think this is one of Trump’s stronger veins of political attack, which he’s leveraging a isolationism. We just shouldn’t be involved in Ukraine. If it were me, like Hamas would have never done this, and we wouldn’t be thinking about it. He doesn’t seem like he is interested. He’s arguing all these things are a distraction.

Now, he also doesn’t have a policy agenda, but I think that the way these things are hurting Biden is a perception that the focus is on these conflicts that most Americans just find to be like an unwinnable morass. And they’re not seeing the action and the progress on the thing that they’re really worried about.

So in surveys, when pollsters are asking voters what they care about the most, they say the economy. And I recognize that I said that you have to take people at their word. I think there’s some chance that the economy is not going to be the decisive issue here. I think Joe Biden and Donald Trump personally, what people personally think about them and how they see them personally campaigning is going to matter quite a bit.

In 2022, we saw Dobbs and we saw immigration as really important and motivating issues for partisans on both sides. And so I think you need a strong economic message. But I think that there’s this way in which we had some elections recently that were absolutely dominated by economic issues. But in 2016, that wasn’t an economic election. 2020, it wasn’t really an economic election exactly, it was very unusual because of where we were in Covid at that point. 2024, I’m not sure that this is an election where the economy is going to be the dominant issue.

And I think that what happens with gas prices and with price competition from retailers is going to matter a lot in terms of folks inflation perceptions and how they feel about their own capacity to spend. And so right now, I would say that those trends are going more positively. And we’ve seen some consumer sentiment numbers that have gone up, which is exactly what you would expect. But we have the summer travel period, and commodity prices are increasing in some cases. So I don’t know how long that will hold.

Then always our final question. What are three books you’d recommend to the audience?

I was trying to think about books about inflation and consumer prices that might be compelling for the audience.

That feels like a small category.

Yeah, it’s a little bit tough, right?

However, there’s a really great book that came out a few years ago called “Franchise: The Golden Arches in Black America” by Marcia Chatelain. And it’s about McDonald’s and franchising, specifically about the growth of McDonald’s and its role in Black communities and with Black consumers. It’s such a compelling book. It’s so wonderful. I learned so much from it.

I recently read the best political book that I’ve ever read, which is called “A Place Of Greater Safety.” It is a novelization of the French revolution. You’re smirking at me.

I’ve never been recommended a book as often in my own household as this book. [LAUGHS]

We were supposed to go out to see friends for drinks, and I was like, I cannot come out because we are in the critical year of 1790. And I need to know what’s happening. It’s like an 800-page historical novel by Hilary Mantel.

Price increases, price instability is a really important part of the French revolution. I didn’t know that much about the French revolution. I knew that it had happened. I knew that you have the French Republic. I knew that you execute a king and a queen, and eventually, you have this dramatic political transformation. It is so unbelievably good and so compelling.

And then I was thinking about, of the best books about the neoliberal economic deal that we make for a really long time in America that I think that we are just starting to upset and grow past, the best book I think about it, and it’s a classic, is “Nickel and Dimed” by Barbara Ehrenreich, which is a book about women in the workforce. It’s about low wages. It’s about tipping. It’s about a million things and it’s just fantastic.

Annie Lowrey, thank you very much.

Thank you. [MUSIC PLAYING]

This episode of “The Ezra Klein Show” is produced by Rollin Hu. Fact checking by Michelle Harris with Mary Marge Locker and Kate Sinclair. Our senior engineer is Jeff Geld, with additional mixing by Aman Sahota. Our senior editor is Claire Gordon.

The show’s production team also includes Annie Galvin, Elias Isquith and Kristin Lin. Original music by Isaac Jones and Aman Sahota. Audience strategy by Kristina Samulewski and Shannon Busta. The executive producer of New York Times Opinion Audio is Annie-Rose Strasser. And special thanks to Sonia Herrero.

All right. We did it. We solved the economy.

Produced by ‘The Ezra Klein Show’

There’s something weird happening with the economy. On a personal level, most Americans say they’re doing pretty well right now. And according to the data, that’s true. Wages have gone up faster than inflation. Unemployment is low, the stock market is generally up so far this year, and people are buying more stuff.

And yet in surveys, people keep saying the economy is bad. A recent Harris poll for The Guardian found that around half of Americans think the S. & P. 500 is down this year, and that unemployment is at a 50-year high. Fifty-six percent think we’re in a recession.

There are many theories about why this gap exists. Maybe political polarization is warping how people see the economy or it’s a failure of President Biden’s messaging, or there’s just something uniquely painful about inflation. And while there’s truth in all of these, it felt like a piece of the story was missing.

[You can listen to this episode of “The Ezra Klein Show” on the NYT Audio app , Apple , Spotify , Amazon Music , YouTube or wherever you get your podcasts .]

And for me, that missing piece was an article I read right before the pandemic. An Atlantic story from February 2020 called “ The Great Affordability Crisis Breaking America .” It described how some of Americans’ biggest-ticket expenses — housing, health care, higher education and child care — which were already pricey, had been getting steadily pricier for decades.

At the time, prices weren’t the big topic in the economy; the focus was more on jobs and wages. So it was easier for this trend to slip notice, like a frog boiling in water, quietly, putting more and more strain on American budgets. But today, after years of high inflation, prices are the biggest topic in the economy. And I think that explains the anger people feel: They’re noticing the price of things all the time, and getting hammered with the reality of how expensive these things have become.

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Economic News

US Economy News Today: Home Prices Hit Another All-Time High

Taylor Tompkins has worked for more than a decade as a journalist covering business, finance, and the economy. She has logged thousands of hours interviewing experts, analyzing data, and writing articles to help readers understand economic forces. She is the Economics Editor for news at Investopedia.

Welcome to Investopedia's economics live blog, where we explain what the day's news says about the state of the U.S. economy and how that's likely to affect your finances. Here we compile data releases, economic reports, quotes from expert sources and anything else that helps explain economic issues and why they matter to you.

Today, we get fresh data on home prices and consumer confidence as a couple of Federal Reserve speakers continue to outline what they're looking for in future data.

Consumer Confidence Dips as Short-Term Outlook Worsens

Consumer confidence dipped in June, as worries about the short-term outlook overshadowed improvement in people's views on their current economic situation.

The Conference Board’s Consumer Confidence Index came in at 100.4 in June, down almost a full point from revised May results . The results were nearly a half-point better than economist forecasts for the month.

Year-ahead inflation expectations declined slightly to 5.3% in June, offering a mixed view of the economy.

“Income expectations were down, vacation plans were up and households' views of the labor market and business conditions were little changed,” wrote Wells Fargo economists Shannon Seery Grein and Jeremiah Kohl.

Conference Board Chief Economist Dana Peterson noted consumer confidence readings had remained within a narrow range over the past two years.

“Consumers expressed mixed feelings this month: their view of the present situation improved slightly overall, driven by an uptick in sentiment about the current labor market , but their assessment of current business conditions cooled. Meanwhile, for the second month in a row, consumers were a bit less pessimistic about future labor market conditions,” Peterson said.

-Terry Lane

Home Prices Hit Another All-Time High

Houses are getting more expensive by the month, although the pace of growth is slowing down. Nationwide home prices rose 6.3% over the year in April, according to the S&P CoreLogic Case-Shiller Home Price Index, Dow Jones Indices said Tuesday. That jump was less than the 6.5% increase in March, but enough to lift the index to a fresh all-time high.

Home prices have continued climbing this year amid solid demand for housing, despite high mortgage rates pushing monthly payments out of reach for many buyers. Reasons for the continued growth in prices include a chronic housing shortage and the fact that relatively few homes are for sale these days because of the mortgage rate lock-in effect.

There’s a vast difference between mortgage rates currently offered—6.87% last week according to Freddie Mac—and the rates that current homeowners secured years ago when rates got as low as 2.65%. That’s discouraging sellers from putting their homes on the market.

Conference Board. “ US Consumer Confidence Weakens Slightly in June .”

MarketWatch. “ U.S. Economic Calendar .”

Investopedia/Julie Bang

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Importance of economics in our daily lives
In a sense, traditional economics encourages us to view life from an economic/monetary perspective. But, perhaps this causes us to miss out on more important issues, such as spiritual understanding, concern for the environment, concern for others and getting the correct work/life balance. Related. Economics in everyday life ; The importance of ...
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It's hard to know what to say, but to get people excited about economics it's good to try and think how economics can be applied in everyday life. Some of this is just common sense, but economics can help put a theory behind our everyday actions. Buying goods which give the highest satisfaction for the price.
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Economics is a social science that deals with the life-cycle of goods and services. It is a study of how innovation and finance revolve around the basic human needs and wants in order to provide products and services to the public. Understanding how economics relates to society is critical to business success but also relates everyday life.
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Henry Hazlitt's 1946 book, Economics in One Lesson,1 remains relevant for readers to this day. In print since its publication, the book has sold more than a million copies, has been translated into 10 languages, and in 2019 became inspiration for a new book, Economics in Two Lessons: Why Markets Work So Well and Why They Can Fail So Badly, by John Quiggin.2 Quiggin rewrites Hazlitt's book from ...
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Conclusion. In conclusion, economics is a part of our daily life. It helps us make smart choices about spending and saving. It teaches us to use resources wisely and understand the world of work. Just like a map helps us find our way, economics helps us navigate through life. So, even though it might seem like a tough subject, it's worth ...
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