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In his new book, Officer offers advice on handling economic matters of all kinds.

UIC Professor Provides Much Needed Economic Advice in New Book

"I always wanted to write a book that presents economics as a practical guide to rational decision-making in daily life and to good thinking about economic matters that affect us all," says Lawrence Officer, professor of economics and author of Everyday Economics: Honest Answers to Tough Questions, a new self-help book that shows readers how to make sense of everything from global economic issues to their own financial situations.

In an easy-to-understand Q&A format, the book addresses more than 100 common questions. Officer’s answers are practical and offer useful lessons, such as whether it’s better to pay off credit cards in full or maintain a balance, how to make decisions about investing in a 401K, how to buy or sell a used car, how a corporation goes bankrupt, or the difference between a recession and a depression.

The following is an excerpt taken from Everyday Economics: Honest Answers to Tough Questions, pages 62-63.

Q: Is it irrational to buy Bayer aspirin instead of much cheaper generic or store-brand aspirin? After all, the chemical composition of aspirin is the same, regardless of the manufacturer. Also, is it irrational to buy Coca-Cola or Pepsi-Cola at the higher price instead of an off-brand cola drink, which is essentially the same stuff but at a lower price?

A: The two cases are not the same. Consider the cola drinks first. Coke and Pepsi are not quite the same drink, and each is slightly different from other cola drinks. There are differences in the ingredients, or at least the mix of the ingredients, in the various cola products. So the different cola drinks do have different tastes. On top of that, and very important for brand loyalty, is the fact that the top brands, including Coke and Pepsi, advertise heavily in favor of their own colas. This advertising predisposes some people to like the drinks, whether for taste or by stimulating their desire to emulate the beautiful people who appear drinking Coke or Pepsi in advertisements, commercials, and billboards.

Aspirin is another, more complicated, case. It is true that aspirin is aspirin—there is only one way to make it. So why do people buy Bayer, paying more for the same product? The answer is that people are judging quality by price. Bayer charges a higher price, so people assume that it must be a better product. Also, we again have the influence of advertising. Bayer advertises, whereas the generic brand does not; any advertising done by the store brand is much less than Bayer. Some customers are moved by the thought of quality control: Aspirin is a drug, and they want to be sure that they are getting the correct mix of ingredients and the precise dosage that is stated on the package. Bayer is a well-known company, and therefore is viewed as the least likely manufacturer to make a mistake in its product. It is probably true that the quality control in the generic or store-brand aspirin is just as good as Bayer—but the customer has no way of finding this out. So some people buy Bayer, the number-one advertised and most popular brand.

Bottom line: It is rational to make your economic decisions not only on price but also on other factors that are important to you. It is also rational to do the opposite and decide that you will buy only the cheapest brand. Economics does not say that only one possible decision is rational.

Lawrence H. Officer, Everyday Economics, published 2009 by Palgrave Macmillan, reproduced with permission of Palgrave Macmillan.

"My favorite part of the book was giving investment advice and advice on purchases of commodities," says Officer. "Virtually all the questions for the entire book were submitted by ordinary people, such as friends of the editor, colleagues of the editor and other workers at various Palgrave Macmillan offices (from secretaries to executives). I was intrigued at the range of questions that the editor forwarded to me from these people. I was surprised that the questions and answers naturally fell into ten chapters. Among the most thought-provoking questions were: "what would happen if the middle class disappears?" and "what's after globalization?"

The goal of the book is to show that economics is "a practical tool of knowledge that is applicable to ordinary people in their daily decisions and in their thought processes regarding the national and international forces over which they have no control," says Officer. "For example, the advice on how to negotiate the best price for a car may save the reader hundreds if not thousands of dollars."

"You don’t have to be an economist to understand how economics affects you. You don’t have to be an economist to use economics to improve your life," he says.