Why You Should Study Economics

In this excerpt from a commencement address, the former president of the Federal Reserve Bank of Dallas makes the case for studying economics.

The Dismal Science? Hardly!

Weeks ago, I had lunch with the smartest woman in the world: Marilyn vos Savant, the Ask Marilyn” columnist in Parade magazine.

According to the folks at the Guinness Book, Marilyn has the world’s highest recorded LO. She is in interested in economics education, of all things, and we met at a board meeting of the National Council on Economic Education. I told her I think economics is a good major of for smart students, but if they become doctors so they could do some body some good. She said, “Yes but doctors help people one at a time, while an Alan Greenspan can help millions of people at a time. She has a point. Mr Greenspan is an excellent example of someone making a big difference by applying good economics.

My take on training in economics is that it becomes increasingly valuable as you move up the career ladder. I can’t imaging a better major for corporate CEOs, congressmen, or American presidents . . . . Economics training will help you understand fallacies and unintended consequences. I am inclined to define economics as the study of how to anticipate unintended consequences.

Little in the literature seems more relevant of contemporary economic debates than what usually is called the broken window fallacy. Whenever a government program is justified not on its merits but by the jobs it will create, remember the broken window : Some teenagers, being the little beasts that they are, toss a brick through a bakery window. A crowd gathers and laments, What a shame. But before yu know it someone suggests a silver lining to the situation: Now the baker will have to spend money to have the window repaired. This will add to the income of the repairman who will spend has additional income which will add to another seller’s income, and so on. You know the drill. The chain to spending will multiply and generate higher income and employment. If the broken window is large enough if might produce and economic boom! . . .

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