How to Think Like an Economist
One of the most important yet neglected concepts is that absolutely everything can be expressed as a percentage of GDP.
One tiny part of the U.S. economy.
Photographer: Ty Wright/Bloomberg
When it comes to “thinking like an economist,” the usual ideas are about supply and demand, prices and incentives, and opportunity cost. That is all well and fine, but there is another important yet neglected component of the economic way of thinking: an intuitive understanding of the size of gross domestic product, and a preference for assessing magnitudes as a fraction of GDP.
While economics has a reputation for being pessimistic (“the dismal science”), most economists I know are pretty optimistic, and tend to see most systems as being robust. In part this is because they have some understanding of the size of the U.S. GDP — about $23 trillion, with plenty of GDP in many other countries as well.