Adding context to economic terms
Some have been bandied about too frequently with minimal perspective
or business investments that take a long time to pay off.
Conditional versus unconditional
On any given day, the likelihood of rain is low. But if there are dark clouds in the sky, the probability is higher. So economists say that while the unconditional probability of rain is low, it becomes conditional on seeing dark clouds — and is much more likely.
One common example of this is life expectancy. People like to point out that life expectancy in the Middle Ages was only about 35. But that includes lots of infant mortality.
If you lived in the Middle Ages and you made it to adulthood, you would probably live well past 35. While conditional life expectancy has increased since then, it hasn’t gone up by nearly as much as the unconditional version — reductions in infant mortality have been the biggest difference.
Aggregate
Something that’s possible for one person often isn’t possible for everyone. For example, the country can only employ so many doctors. So while it might be a good career move for a person to become a doctor, doesn’t work for everyone.
Economists say that something that works individually doesn’t work in aggregate. Another good example is debt. Individually, borrowing and spending money reduces your wealth.
But in aggregate, debt doesn’t reduce the value of the whole world’s wealth, since one person’s debt is another person’s asset. When we consider our own lives, it makes sense to think from an individual perspective, but when we discuss government policy, it’s important to think in the aggregate.
So there are five econ terms I think should enter our everyday vocabulary. As long as this doesn’t happen endogenously, the marginal increase in the aggregate present discounted value of our public discourse would have a high conditional probability of being positive!
OK, so we shouldn’t use all the terms at once. But still, they might be very useful. The writer was an assistant professor of finance at Stony Brook University it