What do economists have to offer business managers?

Accounting professors teachstudents how to prepare financial statements and measure unit cost. Marketing professorsteach the four Ps (product, price, place, promotion). Finance professors teach studentshow to make the maximum use of financial resources. But what do economists do, andhow can they help business managers make better decisions?We should probably begin with a brief apology: economists are social scientists,not practitioners of applied business science. Many lack any formal education in business. Many have never had formal coursework in accounting, marketing, or operations.As social scientists, however, we understand how competitive markets work: howthe free enterprise system harnesses self-interest and channels it into the production of goods and services desired by consumers. We also understand how competitive marketscreate incentives for efficiency at the workplace and lead to cut-throat pricing. And weunderstand how imperfectly competitive markets work against consumer welfare.Much of the thrust of economic thinking is geared toward public policy. Whenconsumers whine about rising gasoline prices and demand government-instituted pricefreezes, economists understand the problems created by price ceilings. We understandwhy international trade does not result in a net mass outmigration of jobs to thirdworldcountries. And on the macro front, we understand why balancing the federal budgetduring a recession is a bad idea, or why the Fed may raise interest rates during periods of strong economic growth.This is the essence of economic thinking: to understand the world around us andto make predictions or policy recommendations for the future. Indeed, busines

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