Response to T.P.
With a little more time and thinking, i figured out what's the importance of economics again... :)
Let me start with what is economics again really.
Because of the fact that the world has scarce resources, people need to face different opportunity costs and optimised according to their preferences in order to make a choice and attain maximum satisfaction. Economics is thus a study of how different agents aka people make their choices optimally if these agents are perfectly rational. (Which you and i do want to believe we are perfectly rational :) ). As such, most of the time, as TP says economics is really common sense at work. For example, Given a choice between time and money, what is your choice really? A perfect rational agent would go for a mixture of both, and everybody knows it. Is economics so simple then? It has far more implications to that and that's why people need to study economics. :)
1. Most importantly, not all agents are perfectly rational. I can't even lay claim to it. However the way rational people choose does give an insight to how a economy make its choices rationally at a macro level. The law of large number states that individual's mistakes tend to cancel out, with a huge population. (Provided the population is rational in general).
2. If you are given a choice to choose between different combinations of time and money, obviously economics is so much simple. However it doesn't end here for most of the case. Because of the fact that there is a regulatory body, namely the government. Even if you decide to sleep the whole day and achieve no money. You can be sure that the government will not want that to happen, and with it comes tools and policies to move people to a socially desired behavior. Government is thus a distortion to economic agents' will or choice. Generally economists are very interested to answer the implications or effects of such distortions.
3. What if the government don't intervene? Surely Economics will meet its end then? Haha... Wrong! If the government don't intervene, we will surely be looking at zero street lights, zero millitary defence and zero education. Everybody agrees the above mentioned things are useful. But nobody wants to pay for it or worst nobody might even want to go to school if given a choice. Economic freedom is thus undesirable, and government intervention is necessary. Then again, Economists are also very interested in how people's behavior can be distorted to achieve better social outcomes. :)
4. Last but not least, finding how individuals behave at a micro level, had a deep impact on the behaior of the economy at a macro level. As a macroeconomics enthusiast, i would like to point out that agents as a whole, can be fooled by the different distortions or can behave in manners that are unexpected or expected. What happens then? Not only at a macro scale. If you pay attention, you will find out that YOU are not optimising your life every single day. (For E.g. 8 hrs of sleep is good, but you probably decide to sleep for 5 hours because of an attempt to complete an assignment you could have completed earlier.) Like it or not, everyone of you is an economist out there, and the beauty of this discipline, is that it can be applied to any context.
Start optimising your life, guys and gals.
************************************************************************************************************************************************************
Never felt so empowered as before. Writing an essay (OH! I am NOT referring to this blog :)) with economic principles. I had the chance today, and no doubt i hope i will have it in the future, i had no illusions about my chances. Seriously hoping i wont be forgetting my economic principles, even if i choose a "not so economics" career.
Let me start with what is economics again really.
Because of the fact that the world has scarce resources, people need to face different opportunity costs and optimised according to their preferences in order to make a choice and attain maximum satisfaction. Economics is thus a study of how different agents aka people make their choices optimally if these agents are perfectly rational. (Which you and i do want to believe we are perfectly rational :) ). As such, most of the time, as TP says economics is really common sense at work. For example, Given a choice between time and money, what is your choice really? A perfect rational agent would go for a mixture of both, and everybody knows it. Is economics so simple then? It has far more implications to that and that's why people need to study economics. :)
1. Most importantly, not all agents are perfectly rational. I can't even lay claim to it. However the way rational people choose does give an insight to how a economy make its choices rationally at a macro level. The law of large number states that individual's mistakes tend to cancel out, with a huge population. (Provided the population is rational in general).
2. If you are given a choice to choose between different combinations of time and money, obviously economics is so much simple. However it doesn't end here for most of the case. Because of the fact that there is a regulatory body, namely the government. Even if you decide to sleep the whole day and achieve no money. You can be sure that the government will not want that to happen, and with it comes tools and policies to move people to a socially desired behavior. Government is thus a distortion to economic agents' will or choice. Generally economists are very interested to answer the implications or effects of such distortions.
3. What if the government don't intervene? Surely Economics will meet its end then? Haha... Wrong! If the government don't intervene, we will surely be looking at zero street lights, zero millitary defence and zero education. Everybody agrees the above mentioned things are useful. But nobody wants to pay for it or worst nobody might even want to go to school if given a choice. Economic freedom is thus undesirable, and government intervention is necessary. Then again, Economists are also very interested in how people's behavior can be distorted to achieve better social outcomes. :)
4. Last but not least, finding how individuals behave at a micro level, had a deep impact on the behaior of the economy at a macro level. As a macroeconomics enthusiast, i would like to point out that agents as a whole, can be fooled by the different distortions or can behave in manners that are unexpected or expected. What happens then? Not only at a macro scale. If you pay attention, you will find out that YOU are not optimising your life every single day. (For E.g. 8 hrs of sleep is good, but you probably decide to sleep for 5 hours because of an attempt to complete an assignment you could have completed earlier.) Like it or not, everyone of you is an economist out there, and the beauty of this discipline, is that it can be applied to any context.
Start optimising your life, guys and gals.
************************************************************************************************************************************************************
Never felt so empowered as before. Writing an essay (OH! I am NOT referring to this blog :)) with economic principles. I had the chance today, and no doubt i hope i will have it in the future, i had no illusions about my chances. Seriously hoping i wont be forgetting my economic principles, even if i choose a "not so economics" career.
posted by xtra_09 @ 5:26 PM
1 comments
