Economics Is the Study of Essay

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Even searching the Internet for information has a cost, the opportunity cost of one's time. Thus, one will consider the cost of obtaining information before seeking it out to make a decision.

The remaining three assumptions of the economic way of thinking deal with the notions of time, personal preferences and predictability. Assumption six makes the point that there are short-run effects and long-run effects for any decision that ought to be considered. For instance, a tariff may increase employment and income in an industry in the short-run, but consumers will decrease their spending on other products in the long-run. Assumption six states the value of a good is subjective and preferences will, therefore, differ between individuals. The final assumption of the economic way of thinking asserts that the test of a theory's validity is its ability to predict how the real world operates.

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Thus, theory's with greater validity should be given more weight than those with unproven accuracy.

In summary, the economic way of thinking is a form of abductive reasoning that starts from a set of accepted facts (identified with the eight key assumptions contained in this paper) and infers the best decision. According to one economist, Heyne (Limitations of the economic way of thinking), the economic way of thinking is a "view that emerges from the presupposition that all social phenomena result from interactions among the choices that individuals make after calculating the expected benefits and costs to themselves. This perspective is very useful when employed to explain the working of the largely impersonal network of transactions that we call the market system or simply the economy.".....

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