n the mid-19th century, historian Thomas Carlyle labeled economics as the "dismal science." As a professor of economics, I have encountered comments, both inside the classroom and out in public, which reflected that there are those who buy into that label still today. Some say that economics is abstract and meaningless in the real world and that they find no practical applications of economic theory and its principles. I am using this article as a means to show that there are, in fact, meaningful applications of economic theory and principles to everyday life.
Consider, for example, something in economics referred to as the "law of diminishing marginal utility" that says as a person increases consumption of a product while keeping consumption of other products constant, there will become a decline in marginal utility that person derives from consumption of each additional unit of that product. For clarification, the term "utility" means satisfaction and the term "marginal" refers to additional units of consumption such as a second or third piece of pizza at mealtime.
Applying this "law," as one consumes, for example, a first slice of pizza, there is a presumption of some level of utility or satisfaction for most people. Consumption of a second slice of pizza may provide additional satisfaction but maybe less than that received from eating the first slice. As subsequent slices of pizza are eaten, satisfaction will diminish with each additional piece and may even lead to negative satisfaction as the person might become sick or even throw up.
As another practical application, I have had students tell me following an unsatisfactory performance on an exam that "I don't know what went wrong because I stayed up all night studying for this exam." My thoughts are that they were the victim of a variation of the "law of diminishing marginal utility."
The first hour of study might result in meaningful learning, but what about subsequent hours of study? At some unspecified point, the benefits of additional hours of continuous study will begin to diminish. At that point, say at 3:00 or 4:00 am, a negative impact of continued study can kick in as a significant mental fatigue appears and that which was learned in the first hours of study may vanish resulting in negative returns that led to failing the test.
A third example relates to athletic training where practice beyond some point may not necessarily be beneficial. As a high school football player many years ago, under an "old school" coach and coaching philosophy, I never understood the logic of what sometimes seemed to be infinite hours of two-a-day workouts in August temperatures. This is not to discredit the necessity of meaningful practice but it seems that the "law of diminishing marginal utility" or benefits would suggest that the benefits of continued practice diminish at some point and even become negative as some participants may become sick, dehydrated, victims of heat stroke, or become injured because of fatigue.
Something called the Pareto principle, or, alternatively, the 80-20 rule, can be inserted here and, also show relevance. This principle/rule named after Italian economist Vilfredo Pareto and introduced in the late 1800's specifies that "20% of invested input is responsible for 80% of the results obtained."
So, there may be practical benefits to limiting consumption of food, managing study for exams, or eliminating excessive practice for athletic competition. Beyond these examples, there may be found broader practical applications of this and other economic principles.