Marginal decision making
Economics is a discipline about helping people, businesses and governments make decisions about the best use of their resources. To make better decisions, do economists recommend the complete remake, or baby steps? N.C. State University economist Mike Walden responds.
“Well … oftentimes we recommend baby steps. And … we call that marginal decision making. And what that does, I think, is recognize that doing a complete overhaul, whether it’s your personal life or your business or even in government, that’s a big undertaking. And what you might want to do is ease into that. You might want to make small changes and then evaluate them and then say, ‘Well, I’m going to continue doing that.’ For example, let’s say that you’re not happy with your job and you know you’ve got to change your … background and you need a new degree. Rather than quitting your current job and going to school full time, maybe what you ought to do, at least start, is take one course at night toward that degree and see if that degree is something — that discipline is something — you’re interested in. And then maybe next semester take another course, and then just continue that. So taking a little baby step toward remaking your professional life.
“Or let’s say you’re a restaurant and you’re not happy with … your revenues and you say, ‘Well, I’m considering re-doing my menu.’ Well, rather than totally reorganizing your menu, maybe what you want to do is introduce one new dish and see if your customers respond to that, and then if they do, introduce another one.
“And our final example, let’s say you’re a government and you’re trying to accomplish something, and you want to start a new program. Rather than … spending millions or billions of dollars on … that program and making it available to everyone, maybe start it off on a pilot basis — maybe experiment and pick a city or a state and … put the program there, and then evaluate and see how it works.
“So this is what economists think is perhaps best in many situations. You take these small incremental movements and do evaluations before deciding to go further. “Category: Economic Perspective