More Microeconomics

I did get busy. I was hoping to be more regular with the Haas posts, and here I am with over a month of absence on this topic. Time is really flying past. We have already gone through the first midsem exams for OB and Econ last week. We are now in the last few weeks of the first quarter.

The economics course with Prof. Busse has been really interesting. She’s great, and I like her more, now that I know she’s doing research on economic instruments to control environmental pollution. One of the most important things that I’ll probably carry from this course is understanding how to rationalize decisions as an economist rather than an accountant. Accountants are backward looking, and account for the expenditures that have been made, while economists are forward looking.

To that end, the concepts of sunk cost and opportunity costs become better defined. I guess all of us colloquially use these terms. Whether or not these should be accounted for in forward plans, depends on the variables I can control in the time horizon I have. Especially if a cost is sunk, then I should not include it in future plans with the thought of “making the most of the money I have spent”. I can remember situations in real life where it’s hard to decide when to cut losses and run. Although if I am running a large company, I can’t see how I can just ignore some investments as sunk. But it’ll be important to know if decisions are being made based on an asset which cannot be retrieved.

I am not sure yet, how to use this information in software product management numerically. But some of the underlying principles are pretty powerful. It’s a bit sad to be at the tailend of this course already. I am quite enjoying it….yes even some of the math!

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