Thursday, August 12, 2010

What I wish everyone knew about economics

  • Economics is the science of decision-making. It has nothing to do with money, except incidentally as a proxy measure for decision-making behavior.
  • Human beings do not make decisions on a rational basis in MANY situations. We are very heavily influenced by things we are totally unconscious of.

  • Adam Smith postulated that a free market could be the most efficient allocator of limited resources if it had three things: Perfect Information, Perfect Competition, and Perfect Mobility. Perfect Information means that all producers and consumers know everything about all the products. Perfect Competition means that no ONE producer has the power to influence prices market-wide. Perfect Mobility means that all consumers can choose among all producers in a particular market.

    We have NONE of these things. HOWEVER... pretty much any government regulation of markets is in the interest of moving us *closer* to these things. Ingredients lists on food? Perfect Information. Anti-trust laws? Perfect Competition. No sales tax on out-of-state sales? Perfect Mobility (in that, when the law was created, it was prohibitive to interstate transactions to require the correct allocation of sales taxes between the buyer's and seller's state, and requiring sales taxes would have basically shut down interstate retail transactions).

  • There are market failures. These are circumstances where the market cannot efficiently allocate a resource. Health care is one; as the price someone is willing to pay for a procedure or medicine that may save their life is effectively unlimited, we cannot rely on demand to have a regulating effect on prices. As emergency medical situations require the fastest action possible, people cannot shop around to the ER that best meets their needs. These are failures of Perfect Competition and Perfect Mobility that simply can't be resolved by any amount of regulation; they're embedded in the product and demand itself.

Is this something?

People say I should have a blog. Maybe they're right. I could try it, see if it fits.

Thing is, I've never been interested in making a blog, because I've never much been interested in reading blogs. Occasionally, very occasionally, a friend will post somewhere that I actually do read "Hey, I've updated my blog with a post about ___________," and it will sound interesting, and I will read it. A subset of those times, I even comment on it. But this is deviation, not routine. (And yes, those few of my friends whose blogs I have read and commented on multiple times... it's totally appropriate to feel like you've won the lottery. Except this lottery consists of words, most of them hypersyllabic, and is of no cash value in any state except Denial.)

But I do spend an awful lot of time spewing words onto screen and disk, and sometimes I look at them and think, "Hey, that sounds good" (/tiphat to Tim Quirk and the rest of Too Much Joy). So this can be a place I can put them all together, to reuse as they come up.

Topic? There is no topic. Or rather, there will be several. I will probably yammer about transportation, food allergies, parenting, social justice, homelessness in Los Angeles, grammar flubs, suicidal bicyclists, and penguins. Among other things. Tagging is my friend.

I do hope this introduction serves to manage your expectations into a nice comfy chair, so that I won't let you down too much when I skip from topic to topic like a toddler taking inventory of the toy room.