By: Matthew Tabor
College is about gaining skills to help you land a great job, or, it’s about exploring your interests, finding yourself and getting a broad education. If polled,100 different people would give you 100 different answers regarding the purpose of college.
There are some courses, however, that transcend all academic paths, classes that are useful and profitable no matter what career you pursue. The first such course is microeconomics. It’s also one of the easiest to understand.
What’s the Point of Microeconomics?
At its core, economics is the study of the choices people make and how those choices affect the world around them. Microeconomics is the subset of economics concerned with individuals, organizations and markets (as opposed to macroeconomics, the study of entire economies).
You may wind up working in finance, serving the government or analyzing market behavior; understanding the concepts of microeconomics will be essential to your success.
But probably not. More likely you’ll pursue any of the other thousands of careers available in our ever-changing global economy. If you don’t plan to work in finance or run for office, why should you learn about microeconomics?
Well, because microeconomics is applicable to far more fields than you think. For instance, it’s incredibly useful for stage managers, blacksmiths and vloggers.
Microeconomics for Theatre
My niece recently graduated from college with a degree in musical theatre. She’s a fantastically talented singer/actress with an interest in stage management, and she’s using economic thinking to navigate the job market.
Knowing the basic economics of how small production companies function helps her understand what these organizations need from their employees. A local theater has relatively limited resources; with such small budgets, they value employees who can fill multiple roles because they can’t afford a huge, specialized staff. When she applies for stage management positions for small theatre groups, she’s best-served by touting her versatility and flexibility. Her resume and cover letters show her range; she has experience in costume design and repair, viral marketing and performance. Moreover, she’s willing to take on whatever responsibilities are required.
That approach would be suboptimal for a large, national production company that expects each employee to do their specific job and only that job. For those positions, she tailors her application to showcase her expertise and depth in a particular area. A large organization won’t value that she’s able to write a Facebook post that draws 20 friends to a show. They want to know that she’s the best person to fill a well-defined need.
That’s economic understanding at work. By recognizing that using different resources to operate in different markets garners positive results, she’s using microeconomics to land the jobs she wants in theatre.
Microeconomics for Blacksmiths
My nephew enters college this fall. He plans to study history, but his real passion is blacksmithing. The application of microeconomics will play a significant role in his success shaping iron as a trade.
Not many people hand-produce iron goods anymore, but it’s never been easier to access products from all over the world. If he makes a candelabra, he’s not competing against a blacksmith down the street who makes a similar product. He’s hoping that someone will choose to buy from him instead of Amazon or eBay, who offer less-expensive, mass-produced wrought iron pieces. He’ll need to structure his time efficiently and frequently reevaluate his business plan to stay competitive.
Let’s say he makes candelabras and decorative horseshoes. A candelabra takes 2 hours to make and a horseshoe takes 10 minutes. Working an 8-hour day and using a set amount of resources, he can make 4 candelabras or 48 horseshoes. But what’s the optimal combination of both that best utilizes his time and resources while matching the demands of his customers?
To find this sweet spot, he’d schedule his day using a production possibilities frontier, an economic concept that will help him make the right amount of candelabras and horseshoes, no more than he can sell and not too few. He’ll gain a solid understanding of what he can produce and can then make decisions accordingly. There will be no stack of leftover horseshoes that he can’t sell. When he’s ready to expand, he’ll use similar concepts to determine how many hours to assign to his assistant, how much to pay him and what type of additional production they can expect by working together.
Microeconomics for Vloggers
Economic thinking isn’t just for stage managers and blacksmiths; it’s also important for new media like vlogging.
A friend of mine wanted to make a living vlogging, but he needed a job that paid the bills. He was committed, though, and wanted to devote as many hours as possible to vlogging while still earning enough for rent and food.
But when he cut down his work hours, he realized that an hour of vlogging meant an hour he wasn’t making $13.50 at his job. For him, the opportunity cost of vlogging (the cost of his decision to do something else with his time) was $13.50 an hour. At 10 hours of vlogging a week, vlogging cost him over $500 a month and over $6,000 a year.
Was pursuing a career in vlogging worth that tradeoff?
He used economic thought to make sure his sacrifice paid off. He found that between planning, writing a script, setup and editing, he could produce a minute of video for each 1-hour session he put in.
But he also found that by filming in larger blocks, such as over 3 hours instead of an hour at a time, he was more productive. His first hour, which included setup time, yielded 1 minute of video, while his second and third hours each yielded 2 minutes of video. The marginal cost (in economic terms) of working to produce one more minute of video was cut in half.
By meticulously analyzing how he used his resources and purchasing equipment that increased his efficiency at an affordable price, he was able to reduce the cost of an hour of vlogging to a level that he was comfortable with.
That efficiency made him an attractive candidate for producing work for others. Thus, he was able to maintain his hobby while also making rent. Eventually, he quit his job and now works in online media production full-time. All because he embraced the economic thinking of his Introduction to Microeconomics course.
Microeconomics Drives Your Life
Economist and professor Gregory Mankiw, the author of the most widely-used textbook on microeconomics (Principles of Microeconomics), starts out by noting that “the word economy comes from the Greek word ‘oikonomos,’ which means ‘one who manages a household.'” Microeconomics is essentially a course in life management; it’s the same today as it was in Ancient Greece.
No matter what kind of life you live, you’ll need to manage it well. To do that, you’ll have to make decisions about what to do with your time and money. You’ll also need to learn how to benefit from how other people handle their time and money.
The common theme among these success stories in stage management, blacksmithing and vlogging is the ability to make well-informed decisions and understand the market at large. That’s using economic thinking without working in economics.
Making smarter choices and having a better understanding of how the world works? Show me a life or career that wouldn’t be improved by that combination.