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1. Schelling’s article was originally a commencement speech for graduates of the department of economics at the University of California at Berkeley. As a student in economics, Schelling’s address is very motivating and uplifting given what so often is written about economists and their influence over public discourse. Too often economics is given a hard time for reasons ranging from not being scientifically dependable enough to being too quantitative to be relevant to reality.

   Schelling, in response to another economist’s critique that economists know only about five things that are “true, important and not obvious”, outlines in the article the various economic truths that can be relied upon as truths in every sense of the word, and not simply because they can be proven per se. He points to accounting identities such as those found in the textbook of any course on the foundations of macroeconomics; identities such as those found in calculating our national income inclusive of the value of our exports, imports, consumption, and savings. All of these accounting identities are important, but in many ways obscure and intangible to the general public. Therefore not doing much to negate the perception that economics does not deal in the “real world”.

   However, what Schelling discusses toward the end of his speech is much more compelling and accessible to almost anyone who has any inkling about the economic way of thinking – he addresses the idea of the proverbial “no free lunch”. Schelling counters this popular economic idea by focusing on a more entrepreneurial perspective and that is that there are actually many free lunches just waiting to be discovered, created, and consumed. These free lunches, as Schelling describes them, come from gains from trade and from accepting that economies are not zero-sum games, but instead malleable and dynamic spaces that can expand or contract depending on the interventions, institutions, and innovations that enter them.

   By communicating the possibilities rather than the limitations of an economy, economists can enlighten more people about how markets can work to make societies more productive and prosperous. Freer markets can make societies more prosperous. So add yet another thing that economists know that is true, important, and not obvious.

   posted 07 Apr 2010, 9:21 PM by Roxanne Alvarez