When we use economic terms loosely, we smuggle in assumptions that the theory itself does not support.

Many debates on economic topics hinge on a set of familiar words: production, prices, costs, value. These terms appear constantly in political speeches, news articles, and policy discussions. Yet they are rarely used with much precision (at least where academic economists are concerned). As a result, people often talk past one another while believing they are in agreement — or disagreement — about the same thing.

Confusing colloquial meanings with technical definitions can lead to deeply flawed conclusions about how markets work and what governments can realistically accomplish. When it is asserted, for example, that governments “produce” value or that sellers “set” prices, these statements seem plausible, but precisely because the words involved are doing too much work. Clarifying what economists actually mean by these terms goes a long way toward dissolving common economic myths.

Two simple examples — one involving production and the other involving prices — illustrate how careless language leads to poor economic reasoning and, ultimately, misguided policy.

Colloquial Language Versus Economic ConceptsColloquial Language Versus Economic Concepts

When Production Isn’t ProductionWhen Production Isn’t Production

When Prices Aren’t PricesWhen Prices Aren’t Prices

Why Precision MattersWhy Precision Matters

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