The human brain has one thing in abundance that brains of most other species do not have at all. That is the power to dream!
And one of the most fantastical things we dream of is that given enough data and enough amount of thinking and more than enough amount of jargon we can solve any problem whatsoever, or at least make others believe that we could. This sort of actually goes against and highly incapacitates the biggest power of the human brain: intuition; the ability to have incomplete data and make decisions which 6 out of 10 times is the correct one, excluding the decision whether another bottle of beer will be too much. Then it is correct 6 out of 11 times.
Still, the second power is slowly being phased out with the increasing use of computers and mathematical models and increasing price of beer. All that remains now is the belief that we can solve any problem given enough data. One thing we sort of ignore is, that by definition “enough” data constitutes all data; i.e. impossible to actually have.
Still, if we cannot join the egg-heads (read economists) in their plans of world domination and genocide by utter boredom, we can at least try to understand what they speak of. For those who are not too clued in with the strange methods I use for communication, I propose to try and understand the basics of economics. And just to spite the eggheads, I shall be using layman language, so layman-ish, that it actually is underground and sinking fast.
So, let us begin. Economics, loosely translates to study of the production and consumption of scarce resources. That is why you are called “economical” when instead of buying your own beer; you let your “friends” buy it for you.
Economics is basically about questions. It is believed if the right questions are asked, the right answers come automatically.
Yeah right! Tell that to the teachers and professors I have mown down in my long and eventful life, at least those who have not been reduced to gibbering wrecks.
By the way, the major questions asked by economists are:
a. What should be produced?
b. How should it be produced?
c. Who gets to consume what is produced?
[As far as I guess, the answers are: (a) Beer, Ale & Lager; (b) Any way possible; and (c) Me]
Aah, that’s not what your professor told you (about the questions thingee, I mean. The answers are perfectly agreeable to all, I presume). Well. Then your professor was trying to pull a fast one upon you. You should take this up with him, next time he dares cross your path.
Economics is not Astrology. It does not predict the future for you. Nor does it tell you which horse to bet on. Literally as well as figuratively. “Which is the better course of action?” is the figurative part.
Economics is not a Make-A-Wish Forum. It is not about the answers you (or anybody else) prefer. It is just about how to understand and think about the problems.
Economies are based on the answers to these basic and some not-so basic (to be dealt with later) questions of Economics that the particular society chooses, or deciphers.
At one end of the spectrum is where every individual is free to answer these questions whatever way they want, and work accordingly. The culmination is anarchy or utopia, which depends on whether you are a cynic or a dreamer.
At another end, is where the government (consisting of one person or many) decides the answers for each of these questions for every individual, and everyone “has” to work accordingly. The culmination is your-guess-is-right.
Mostly, all the present economies lie somewhere in the middle. When the society verges closer to the first option, they call themselves “free economy”, and when the society verges closer to the second option, they are called by others as “controlled economy” or “communist b******s”.
The basic beliefs of all economists which they almost share without fail are:
- People are statistical quantities. Economists do not believe in real people.
- There is a downside to everything. They believe in trade-offs. Dependent on the weightage to different aspects, they come upon various scores, but they sure do keep score conscientiously.
- Selfishness is good. Selfishness is self interest. It helps in general productivity. For better understanding this, refer first belief.
- Whenever an individual or company is faced with change, they react as per their perception in the change in the level of incentives-punishments.
- Prices are not set by anyone. They are the result of interactions between all the buyers in the market and all the sellers in the market. By “all” they mean present buyers/sellers as well as prospective buyers/sellers.
- Any choice taken should take the other choices foregone as additional costs, as they were opportunities foregone. They use the term “opportunity cost”. Neat, huh!
- Justice and morality are not reasons for any decision. To better understand this, refer third belief.
So task for today (and quite a few days ahead): Start thinking in these lines. Make these beliefs a part-and-parcel of your basic mindset. This will have atleast one positive outcome. All your friends and family will leave you. Then you will have more time to try to understand (and fail) what exactly is up with the markets.
Random Mythoscopy 