Flat tax proposals, health-care regulation and mad cow disease. What do
these three things have in common? Jane Leuthold says they provide wonderful
examples of economics in action.
Leuthold is a professor of economics at the University of Illinois at Urbana
Champaign. Leuthold says she uses current events to demonstrate economic theory
to her students. "It is really about behavior and why people do things for
economic reasons," she explains.
Giving lectures is only part of Leuthold's job. She also researches
and writes papers about public finance. "I love markets. I love to study human
behavior and how taxes affect the labor supply."
As a tenured professor, Leuthold has the freedom to study and write about
her findings, even if they aren't politically popular. Economists working
for government and big business don't always have this freedom.
Leuthold didn't always want to be an economist. She enrolled at Michigan
State University thinking she wanted to be a journalist. Then the university
gave her some standardized tests and said she should study math instead. The
findings came as a bit of surprise!
"When I was in high school and took those career tests, they said I was
supposed to be a garage mechanic!" she laughs. Leuthold switched majors and
excelled in math, but in her last year she decided she didn't want to
pursue math as a career.
She approached her economics professor and asked him to write a letter
of recommendation for graduate programs in economics. He did. Leuthold was
accepted and pursued her doctorate in public finance at the University of
Wisconsin.
"Economics is an applied math subject, a lot like physics," she says.
Meanwhile, it was physics that John Irons first studied when he went to
university. At the end of second year, he realized he didn't care about
the motion of atoms.
"What I was more interested in was human behavior," Irons remembers. He
switched to economics. When he graduated he went to work for the Federal Reserve
Board in Washington, D.C. Irons liked the work. For him, it provided a good
mix of research and policy making.
Irons then went on to pursue a PhD. His reasons? A better career and more
money.
Economics can change the way you look at the world, says Irons. Take the
apartment he had when he was in school. He couldn't afford it! But according
to economic theory, he should have been living at the level he expected to
be able to live in the future.
"It's called a permanent income hypothesis," he says. In other words,
he should look at the income he will make in his entire life and then make
decisions based on that. In the apartment scenario, he could borrow against
his future earnings as a university professor and be able to afford it.
Economists can have a funny way of thinking about things. Irons tells this
joke that spoofs the way economists think: An economist and his friend are
walking along a street. The friend says, "Look, there's a $20 bill over
there on the sidewalk." The economist says, "There can't be, someone
would have picked it up by now!"
The truth behind this joke is that economists believe that if there are
opportunities for profit, someone will exploit them. "So it's hard for
an economist to believe that there is an easily exploitable commodity just
lying on a sidewalk," explains Irons about the $20 bill.
Explaining economic principles like this one can be challenging. So Leuthold
found a way to make it easier. For instance, she posts her lectures and slides
on the Internet.
"I have two sons who pushed me in that direction," she says. The system
is working so well that she has abandoned her overhead projector in favor
of an in-class link to the Internet slide show. "I get a lot of frantic calls
at the end of semester from students wanting to know how to download the lessons!"
Leuthold likes her job. "You're well paid, and I tell them it's
interesting and it's fun."
Another economist who likes her job is Nancy Olewiler, chair of a department
of economics. She doesn't mind spending her entire day at a desk working
with numbers.
"Rarely do I get to work out of the office or very far away from a computer.
But the truth is that if you love the work you do, it isn't a problem.
Your mind is engaged all day every day....What could be better?"
As for Irons, the only thing he doesn't like about his
field is that economic analysis can seem far removed from any practical application.
Yet there is lots of scope within the field so people can pursue their various
interests.
This field is not all dry numbers and statistics and dollars and cents.
Rather, it's the study of human behavior.
"My father was a psychologist," says Leuthold. "Maybe I got it from him,
but I like puzzles and figuring out why people do what they do." Economically
speaking, of course.