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Do Economists Recognize an Opportunity Cost When They See One? A Dismal Performance from the Dismal Science

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  • Ferraro Paul J

    () (Georgia State University)

  • Taylor Laura O

    () (Georgia State University)

Abstract

One expects people with graduate training in economics to have a deeper understanding of economic processes and reasoning than people without such training. However, as others have noted over the past 25 years, modern graduate education may emphasize mathematics and technique to the detriment of economic reasoning. One of the most important contributions economics has to offer as a discipline is the understanding of opportunity cost and how to apply this concept to all forms of decision making. We examine how PhD economists answer an introductory economics textbook question that requires identifying the relevant opportunity cost of an action. The results are not consistent with our expectation that graduate training leads to a deeper understanding of the concept. We explore the implications of our results for the relevance of economists in policy, research, and teaching.

Suggested Citation

  • Ferraro Paul J & Taylor Laura O, 2005. "Do Economists Recognize an Opportunity Cost When They See One? A Dismal Performance from the Dismal Science," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-14, September.
  • Handle: RePEc:bpj:bejeap:v:contributions.4:y:2005:i:1:n:7
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    Cited by:

    1. Luke M. Froeb & James C. Ward, 2011. "Teaching Managerial Economics with Problems Instead of Models," Chapters,in: International Handbook on Teaching and Learning Economics, chapter 59 Edward Elgar Publishing.
    2. Cole, Scott, 2012. "Equity over Efficiency: A Problem of Credibility in Scaling Resource-Based Compensatory?," CERE Working Papers 2012:12, CERE - the Center for Environmental and Resource Economics.
    3. Daniel Arce & Sherry Li, 2011. "Profits, Layoffs, and Priorities," Journal of Business Ethics, Springer, vol. 101(1), pages 49-60, June.
    4. James K. Self & William E. Becker, 2016. "Teaching and Learning Alternatives to a Comparative Advantage Motivation for Trade," The American Economist, Sage Publications, vol. 61(2), pages 178-190, October.
    5. Anthony J Culyer, 2018. "Cost, context and decisions in Health Economics and cost-effectiveness analysis," Working Papers 154cherp, Centre for Health Economics, University of York.
    6. Daniel F. Stone, 2015. "Clarifying (Opportunity) Costs," The American Economist, Sage Publications, vol. 60(1), pages 20-25, May.
    7. Howden, David, 2016. "Finance Behind the Veil of Money: Response to Dr. Braun’s Comment," MPRA Paper 79798, University Library of Munich, Germany.
    8. Lee C. Spector & Courtenay C. Stone, 2010. "Suspicious Estimates of Ex Ante Real Interest Rates: Evidence of Macroeconomic Malpractice?," Working Papers 201010, Ball State University, Department of Economics, revised Oct 2010.

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