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The sunk costs fallacy: an unlikely friend

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Sunk costs are one of the first things any economics student learns about. For the uninitiated, a sunk cost is defined as ‘a cost that is already incurred and cannot be recovered’. Specifically, it is taught that any rational decision maker should not take sunk costs into account when making decisions. This might seem like …

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Behavioural economics: why do we study at university?

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My friends, the end of the semester is approaching, and there is a distinct lack of motivation in the air. That’s right, final exams are looming upon us, and understandably we are unenthusiastic about it. While I enjoy my studies, I dislike burning the midnight oil, drinking copious amounts of coffee just to stay up late at night to squeeze in that last little inch of knowledge into my brain. In times like these, I wonder why we slave away through the torture that is studying just to get good marks. My friends, why do we put up with this? Why do we choose to study at university?

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Should you consider a career in academia?

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Do you possess an insatiable thirst for knowledge? Mike Pottenger recounts his journey to becoming an academic and shares a few valuable pointers for anyone considering doing the same.

Statistics, social science, and the media

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Everybody likes to hear a confident opinion. Take Truman’s wish for a one-armed economist, for example, who would be unable to tell him ‘On the other hand…’. Headlines are often written with a confident certainty. Qualifications and conditions aren’t as convincing. The problem is, it can be difficult to distil even a single scientific study without distorting the complexity of the work.

Unfortunately for scientists (whether social or natural), while people prefer statements delivered with certainty, we are in the business of uncertainty. Our methods are based on scepticism, our conclusions full of caveats. Unlike Truman’s fantasy economist, we do have another hand and are often obsessed with what might be on it.

This is why if someone conducts a study showing one kind of relationship, others will be eager to see if they can find the opposite or no relationship. But this healthy scepticism is sometimes transmitted to the broader public in unhealthy ways.

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Three ways economics can make you a better student

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The clock is ticking down towards the start of the semester. You know those scenes in films where a military unit is checking all their gear, lining up their sights, strapping themselves in? That’s what university students are doing right now. You can hear (or overhear) it in the conversations on campus.

 

Take this one, for instance:

Student 1: “So, what happens in tutes, then? Do you need to bring the textbook?”

Student 2: “Um…maybe? Dunno. D’you know if it’s an easy subject?”

Those were first years, figuring out how exactly it is you go about studying at university, and trying to pick low-hanging-fruit electives.

 

Here’s another:

Student 1: “I’m not falling behind this semester.”

Student 2: “Yeah, me too. Gonna do the reading.”

Student 1: “Yep. Gonna do it before class.”

No points for guessing that these were returning students, promising themselves they’ll do at least some things differently this time – try to improve on their past performance by learning from past mistakes.

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So what is economics?

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A piece inspired by my friends, family, colleagues and acquaintances who have yet discovered their appreciation for economics.