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A personal story of practicing economy knowledge in real life

Only a small group of economists probably like it. I mean me and a random guy in Slovenia. It's not a huge problem, since nerdy economic theory is what I enjoy and want to write about. This blog is mostly me talking to myself, so who cares? However, that's not enough. Economics is the coolest discipline in the world. I'm sorry my physicists friends, yes quantum theory is crazy and fun, but economics tops it.

The best subject should reach everyone. It has insights that anyone can apply to their daily life. My love of economic theory sprang from the "everyday" wisdom it provides, not the other way.

Economics does not allow us to predict the future, but it does allow us to see the world more clearly.

It is a good pair of glasses, not a crystal ball. Now the picture might make more sense. I'm outing myself as a nerd again. So for all readers, economists and real people, here are five life lessons that economics taught me. I hope they can help you.

One man's attempt to understand human action through the economic point(s) of view

Everything has a cost. This could also be called " there ain't no such thing as a free lunch. The cost of something is the next best alternative. It costs "the next best thing," whatever that is to the person. More importantly and less recognized, economics taught me that time has a cost. Even if I am attending a "free" lecture, watching a "free" movie online, or enjoying someone else's "free" food, I am paying a cost, whatever else I could have done.

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Economics taught me to consider all available alternatives. Every decision is about the best choice given the proper understanding of cost, not just price. Viewing time, price, and countless other subjects under one idea, cost, helps improve decision-making. Dollars and cents can be an easy approximation, but life isn't about easy. Do the proper calculation. Short story- a friend once asked me if I thought what we were talking about was the best use of our time.

I quickly said yes. I had already thought it through and decided that talking with her was my best option among all available alternatives. She didn't think it was a compliment, but I thought it was. Insight 1 has also helped me be more positive. I know that I am making the best decision given my information.

There is always room for growth and improvement down the line, but at any moment I am doing the best thing I can. I didn't do great on an exam, fine, I decided that the extra studying was not worth my time. I calculated that at the time. Information and knowledge are expensive. Before studying economics, specifically, before reading Hayek and SowellI was fairly confident about my understanding of the world.

Before Economics, it's an actually dividing line for my lifeI could tell you when people were making dumb decisions, what the problems were with policies, or why a certain event happened. Now, I am much less confident. Information is highly dispersed. Even the smartest people in the world do not know a minuscule amount of the information that everyone else knows.

  • These applications will become more widely used with familiarity that is gained during the next decade;
  • Economics does not allow us to predict the future, but it does allow us to see the world more clearly.

It is costly for me to gather information and I often do not have the incentive. Shareholders who are paying CEOs millions or school districts who are changing curriculum have more info on their choices than I ever could.

A personal story of practicing economy knowledge in real life

If I think they are doing something wrong, I should take a step back. I am still highly skeptical of others, but I am also skeptical of my understanding. A corollary is that even if I or anyone else cannot explain something, it does not follow that there is not reason. Again, disperse knowledge is more than anyone can understand. I, Pencil is an example of this. I don't mean that people are computer-like calculators of pleasure and pain.

I do not mean that people have perfect foresight and perfect information. My definition of rationality is less demanding, but still helps me make sense of the world. Why would someone go skydiving? I never would, mostly because I'm a little baby about heights. People can think things through. If price of a TV goes down, more people will buy it, simple supply and demand stuff. In my daily life, this teaches me that if raise my personal price by being more annoying or less friendlypeople will want to hang out with me less.

Of course, everyone knows this. That is part of it, but economics is not just common sense. Economics forces me to ask, why would someone do that? And "they are crazy" is not a good enough answer. It is easy to get stuck in the present. What is the most fun today? What will make me the most money today? How can I pay my bills today? While today is the most important day in any decision, it is not the only one. I need to take into account the future.

Again, this is obvious, except when it's not.

The Future of Jobs and Jobs Training

Some people argue to avoid debt. Of course, if the decision is debt vs. However, that's never the case. I need to look at decisions through time. Many decisions are actually investment in relationships, careers, hobbies, or goals. If they rewards will pay off over time, I need to not ignore that.

Another anecdote- I bought an iPad in August. I'm probably on it too much. However, I calculated that it would "pay for itself" in a few months and it has. Since I am not working, I paid for it indirectly through a loan, i. If I would have been fearful of debt which is a current balance-sheet number, not an expected lifetime numberI would have made the wrong choice.

From a pure dollar calculation, it has saved me money. Now, this increased reading will hopefully also pay off in a better job in the future. Again, many decisions are investments. Add it all the "non-productive" benefits, it was a clear choice.

I try to make the same type of decision with varying levels of focus with all decisions, not just college, housing, or portfolio management.

I am not saying buying things makes people happy or that endlessly consuming is good. I'm saying people need to keep the "big picture" in mind and not be short-sighted. However, I keep mentioning it, because it is vital and easy to forget. People act in the present to change their future state to something better.

Nothing in that statement, which is true, refers to the past. When I was debating whether to pursue a PhD in economicsit would be easy to say I've put in all this training at my masters to prepare me: That would be faulty reasoning.

Instead, I asked, given the current situation with all the good and bad things that have brought me here and no matter the past, what should I do? This helps me avoid throwing away more time and money into a lost cause. You'll be better for it. The goal is to maximize future benefits. Some more examples are in a 2007 graduation speech by Thomas Sargent.

  • Certainly science and technology are important, but we need to refocus liberal education, not ignore it;
  • And online learning will be more prevalent, even as an adjunct to formal classroom learning;
  • Everything has a cost;
  • The following section presents a brief overview of the most evident themes extracted from the written responses, including a small selection of representative quotes supporting each point;
  • That includes anyone whose primary job functions are transactional bank tellers, drivers, mortgage brokers.

His are short and sweet. Some bloggers liked them. Everyone should check them out and make up their own mind.