finite desires

The first thing we learn in any introductory economics class is the definition of economics, which is widely accepted to be how we, as rational humans, with infinite desires, should act in a world with finitely scarce resources.

There are two important notes here:

  1. Humans are rational
  2. We have infinite desires

Both of these concepts, when looked at carefully, actually seem very contradicting if you’ve lived past your teenage years.

Because, well, 1) humans are the exact opposite of rational, and 2) if we had infinite desires, why do people give away their goods to other people?

Economists rarely address the legitimacy of the rational choice model, unless you study the field of behavioral economics which blends psychology with microeconomics.

Most people understand though that we really aren’t rational.

The second note is humans having infinite desires, which also seems a bit off.

If I had infinite desires, why would I ever choose to share what I have with other people?

Rather, in life, my decisions aren’t actually to obtain as many goods as possible. Don’t get me wrong: material goods are great. But there is a limit.

The richest people often end up starting philanthropic work because there is indefinitely a point in our lives when we realize that earning income, although is necessary for modern day survival, does, in fact, feel rewarding, what is more fulfilling is actually giving.

To flip the terms:

Humans are irrational and we have finite desires.

With this framework, we shall see how humanity should better reflect choices.

This will be a future topic I will address once I’ve learned more about this framework. If you are interested in this framework, I learned it in my humanities professor’s amazing book that brings economics into conversation with Thomas Aquinas.

You can find it here: Aquinas and the Market: Toward a Humane Economy

 

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Taxes???

I literally had a dream about taxing the rich last night. And while I don’t necessarily have a firm position on tax, I think there’s more to the picture than just tax or no tax.

I believe an honest major issue in regards to tax politics in America is that majority of the people who throw their rage of attacks on the “leftist liberals” is that they don’t truly understand how tax works in America—Marginal tax bracket.

And believe it or not, there’s actually an economic benefit (called Laffer curve) to the recently quoted 70% tax on the ultra rich ($10 million+)

Look out for a future DTF post where I try to shed some more light on this entire issue.

Thoughts?

Pressing issues

I’m probably like most people around my age that live on the West Coast in Canada:

Liberal–at least socially.

Scorns at hate crimes and racial bias

Low-key panicking about global warming and the inevitable doom of our environment

Cares about charity and curing poverty

And probably have a few not-to-kind things to say about Trump

But a part of me realizes that I complain too much

The inner economist realizes that the world isn’t as black and white as we’d like it to be. And the world doesn’t care about opinions or complaints; the world cares about facts, data, statistics, and results.

“If morality represents how we would like the world to work, then economics represents how it actually does work.” – Freakonomics

The great thing about studying economics though, particularly if you also study politics and behavioral economics, is that you begin to understand the world a lot better. You begin to grasp the concept of incentives, of society, of the rationality (and irrationality) behind human decisions.

I think it would be a disservice to myself if I didn’t continue my passion for studying economics, as well as the “moral” aspect of the world. Maybe then, in the future, I won’t need to be talking about the pressing issues of the world; instead, I’ll be able to discuss the solutions we can apply to fix those issues.

[Book Review] Freakonomics

[Freakonomics: A Rogue Economist Explains the Hidden Side to Everything] – by Stephen J. Dubner and Steven Levitt was a great book. 

It was different. And I liked it.

Freakonomics makes you look at the world in a different way.  The book explores the real reasons for the 1990s crime drop, information asymmetry, real estate agents, correlation vs. causation, and, most importantly, in the introduction, which discusses the fundamental principles of incentives. From then on, each chapter focuses on answering, or more so addressing an unusual question.

Continue reading “[Book Review] Freakonomics”