11 What criteria can we use for selecting strategies from among different
possible courses of action?
12 How do political biases and agendas affect decision-making processes in
practice?
The above questions represent steps in the decision-making process involved
not just in the global warming situation, but also in any situation involving
decision-making. However, many people are unaware of the breadth of issue
that is amenable to the analysis of managerial economics. In particular, they
sometimes regard managerial economists as being apologists for greedy capitalists,
who do not take quality of life into consideration, or the long-term interests
of the public. They may view markets with suspicion and doubt their ability to
allocate resources efficiently, for example the creation of trading rights in pollution.
They may fear deregulation, seeing it as leading to the exploitation of
consumers by monopolists. They may believe that it is impossible in principle
to put a money value on human life or health. Theymay believe that governments
should not be swayed by narroweconomic interests and analysis, and have a duty
to exercise ethical principles which otherwise would not be considered. Such
antagonistic feelings towards global capitalism have been expressed at various
meetings of international politicians to discuss world trade. On amore academic
level, there has for some years been huge controversy surrounding the publication
of a book by Lomborg3 taking an economist’s approach to these issues.
Much of the sentiment expressed is based on an ignorance of the issues
involved, a misuse of statistical information and a lack of understanding of
economic analysis, its relevance and application. One major objective of this
book is to explain not just the methodology of managerial economics but also
the breadth of its application, and to illustrate that it can have a lot to say about
the types of issue raised in the above case study. All the case studies in the text
have been selected with this objective in mind; for example the following
situations and issues are discussed: prize money in sport, the law of diminishing
returns applied to computer software, Internet banking and competition,
price discrimination in the pharmaceutical industry, issues in the National
Health Service, deregulation of electrical utilities, the level of fuel taxes and
subsidized car manufacturing.