Some of the most successful and influential business leaders in the field of finance have an academic background in economics. For example, Warren Buffet himself holds a master’s degree in economics from Columbia University (1951), while Kenneth C. Griffin got his Master of Science in Economics degree from Harvard (1989).
Given that economics as a subject is all about defining, analyzing, and interpreting all aspects of wealth generation, consumption, and distribution, the predominance of economists in the corporate world should not come as much of a surprise. Entrepreneurs with a deeper, better understanding of applied economics will always be in an advantageous position in the corporate world.
It’s not only about business owners and CEOs either, because a proper understanding of economics can be just as beneficial for a business manager at any level. On that note, let’s take a closer look at some of the reasons why applied economics plays such a crucial role in business success.
Putting Economic Theories into Practice
If economics defines, analyzes, and interprets the various financial datasets and theories, applied economics teaches how to turn that information into actionable insights, apply them in real-world decisions, and improve economic efficiency on an organizational level.
For example, the theory of microeconomics states that price hikes fueled by higher demand in comparison to supply will inevitably be brought to a halt and then back down after the price reaches a certain point. Once the price reaches/surpasses that point in its hike, that in itself will be the primary reason why the product’s demand will begin to sag exponentially from that point on.
Low demand will then bring down the price, thus proving that supply and demand tend to cancel each other out in the long run. This online MSAE degree course focuses on teaching people how to apply the theory of microeconomics in real-life scenarios to calculate, analyze, and predict that specific price point, as well as the market forces which will bring down the demand.
Policy Creation for Internal Improvements
Economists work diligently with the government at all levels to help them create the most beneficial and the most practical administrative policies possible under the concerned circumstances. When an economist applies that same effort toward creating internal business policies for improving the company’s internal infrastructure, the results can be extremely impactful. Policies become more practical, fact-based, and focused on bringing about positive changes where needed, without changing any existing policies that do not need to change in any major way.
Futureproof Business Planning
A big part of modern economics involves data analysis and predictive modeling. Applied economics teaches how to utilize the insights gained from them. The focus of applied economics is to integrate and implement those insights into the planning process. Due to the scientific foundation it provides, this naturally allows business leaders to make better, more informed decisions while planning every new step.
Since a predictive model is created to show a number of possible or most likely future outcomes, business planning with applied economics provides a degree of future-proofing to each of those steps as well. From predicting future market trends to stocking strategies based on predicted demands, the scope of business planning with applied economics is virtually endless.