Marginal Thinking

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Elasticity—one of economics' most powerful concepts—measures how much one quantity changes when another increases by one percent. But its true value lies in teaching us to "think at the margin."

Consider the common dilemma of whether to spend more time working or with family. Economists would say this question is incomplete without context. If you're working few hours with pressing financial needs, more work makes sense. If you're rarely seeing family, another hour at home might be more valuable.

"Often times, I find myself or others around me making decisions based on absolutes instead of thinking marginally," notes Marie-Pascale Grimon, a Harvard Kennedy School PhD student. "Usually we forget to ask ourselves whether that additional time spent doing such and such is worthwhile." The wisdom lies not in absolute judgments about work or family time, but in evaluating what you gain from that next hour—the marginal hour—given your current situation.