Surely one of the easier subjects to show the importance of is economics. Yet, while it has obvious practical benefits it seems to be rarely taught well or with an eye towards understanding fundamental principles or how they apply in the real world. Economics courses seem to be heavily skewed towards explaining theory but not practice. That is, when such courses are taught at all which is often not the case in primary and secondary schools. No wonder people’s money management skills are often so poor.

Money Management: Of course, this is the main practical benefit of learning about economics. While the study of economics, in and of itself, will not make you wealthy, failing to learn and apply basic principles of saving and investing will surely keep you poor. Millions of people were raised to believe, and many still do believe, that investing is nothing more than gambling and no more reliable as a way to build wealth and financial security than buying lottery tickets. Still more believe that credit cards represent free money and have already spent their next raise without ever seeing the money. The study of economics is a good first step towards fixing some of these problems both in one’s personal life and in our nation which also suffers from poor economic thinking and planning.

Value: The notion of value is important both in economics and life in general. Thomas Sowell points out that many people wrongly criticize economics by pointing out that there are also such things as “non-economic values,” to which he responds by saying that of course there are non-economic values. In fact, there are only non-economic values. Economics is not a value itself but a way of determining the costs and benefits of trading one value for another.

Trade-Offs: The notion of trade-offs is a difficult one for many to accept. In a complex world we often want simple solutions but as often as not there are not solutions to problems at all, only trade-offs. We can spend more money on groceries only if we are willing to spend less on shoes. We drive safer by slowing down only if we are willing to spend more time on the road. Many areas of life involve such trade-offs and economics provides a clear method for thinking through how to make these trade-offs in the best way possible.

Planning: In Basic Economics, Thomas Sowell writes about his experience as an undergraduate in economics: “When I was an undergraduate studying economics under Professor Arthur Smithies of Harvard, he asked me in class one day what policy I favored on a particular issue of the times. Since I had strong feelings on that issue, I proceeded to answer him with enthusiasm, explaining what beneficial consequences I expected from the policy I advocated.

“And then what will happen” he asked.

The question caught me off guard. However, as I thought about it, it became clear that the situation I described would lead to other economic consequences, which I then began to consider and to spell out.

“And then what will happen after that?” Professor Smithies asked.”

This continued for several more rounds until: “By now I was beginning to see that the economic reverberations of the policy I advocated were likely to be pretty disastrous and in fact, much worse than the initial situation that it was designed to improve.”

The world is filled with such examples of the failure to think things through beyond the first stage. As the economist Bastiat pointed out, good economists see beyond the visible consequences of their actions to the less visible and unintended consequences. While not immediately visible itself, this is one of the most important benefits of the study of economics.