Friday, March 28, 2008

Economics and Matt E. Ryan

I read a blog post a while ago-- it may have been on Marginal Revolution, but I could be wrong-- to the effect of how economics helps you through your everyday life. I thought I'd offer my own list:

1) The rules of the game are the biggest factor out there. By a lot. Messed up situations are usually a function of messed up rules.

2) Given that it is the rules of the game that are so important, people spend too much time worrying about the selfishness of others. Could a little less selfishness in the right places leads to good outcomes? Probably. But on net, selfishness-- at least in this country-- is a big positive.

3) Given that people are self-interested, it is typically not especially hard to figure out what people are going to do if put into a pre-determined situation. This gives me a lot of comfort.

4) Consumer surplus and producer surplus are really important ideas, right out of Econ 101. I've been debating with myself over the past week or so whether total consumer surplus would be greater than total producer surplus, world-wide, if such a calculation were feasible. I continually come to the conclusion that consumer surplus is bigger-- a lot bigger. This also gives me a lot of comfort. Maybe this is because I'm not on the producer side too often, though I do supply my labor. I have a general inkling-- misguided as it may be-- that people who demand things get a bigger share of the surplus than those who supply them.

5) On the whole, people generally don't take advantage of other people. In our system, for the most part, you end up better off by cooperating, not coercing. Cooperation and selfishness are often painted as mutually exclusive by the non-economist; this is not accurate.

6) Just about everything in my life (absolutely everything?) is voluntary. This, too, gives me a lot of comfort.

7) It's OK to like big companies. They provide a lot of good things for a lot of people. That's why they're big. Big companies allows us to spend money at small companies. I'm glad I realize this.

1 comment:

Justin M Ross said...

8) As an economist you are typically surrounded by interesting people who think about the world in a manner you will not find in any other line of work.