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Economics, an epiphany

 
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Mark



Joined: 22 Mar 2007
Posts: 1385

PostPosted: Tue Oct 21, 2014 12:16 am    Post subject: Economics, an epiphany Reply with quote

I listened to a course this year that was a real revelation. I've been interested in many sciences all my life, and I've been listening to several of The Great Courses from The Teaching Company each year for several years, yet somehow I managed to reach almost 60 years of age without ever studying economics.
This summer I listened to "Thinking like an Economist: A Guide to Rational Decision Making" by Professor Randall Bartlett, a short course (only 12 lectures). It was a real eye-opener for me. Most of this post is thoughts inspired by the course, not material in the course.
I encourage anyone who likes audio or video courses and isn't already familiar with the basic principals of economics to check this one out. I also think our society as a whole would benefit greatly from including some basic economics classes in the standard high school curriculum.
I had never really thought about it, but I would now classify most of economics as a specialized sub-discipline within psychology and/or sociology, since it is dealing with questions of what people think and do. There are clearly parts of economics that are not for the innumerate, but quite a lot of economic thinking doesn't require any math at all.
Among other things, economic thinking makes clear to me as never before HOW the US political right is wrong.
The first principle of economics in the course is "People respond to incentives". Laws, regulations, tax structures, social norms, and similar aspects of the human world all provide incentives to individuals and businesses.
Lecture 5 explores "the tragedy of the commons", a phrase I've encountered before but never really researched. A "common" is anything everyone uses but nobody is explicitly required to pay for.
The primary goal of any for-profit business is profit. Governments, NGOs, non-profit businesses, and some people can address problems with commons, but no for-profit business can address commons issues without being at a disadvantage in competition with other for-profit businesses UNLESS a government has created laws and/or regulations that FORCE all businesses to include costs of commons as a routine part of doing business. This is why we need governments that create and enforce controls on (air, water, ground, electromagnetic spectrum, genome, space, etc.) pollution, set and enforce minimum wages, ban (racial, ethnic, gender, gender-preference, national origin, religious, etc.) discrimination, maintain and/or regulate infrastructure (highways, bridges, shipping channels, ports, airports, power distribution networks, etc.), and all the other things that can be viewed or treated as commons.
The lectures explained cap & trade systems in a way that finally let me understand how & why they can work if they are designed right. They also described how the problems of over-fishing can be addressed (and have been in limited areas) by systems of catch rules designed based on rules from economics. Both of these are examples of how well-designed incentives can fix problems.
The shrinking of government by the right-wing from Reaganomics through the Tea Party has led to deterioration of the commons in the USA that is approaching disastrous levels.
Many laws created in the last several decades create "perverse incentives", which lead people to act against their own best interests or against the best interests of society or humanity as a whole. Governments bribing businesses to come to a state or county or city are an example of perverse incentives. Public money goes into the pockets of private businesses, usually ending up costing the region as a whole because promised benefits from the presence of the business were overestimated or overstated.
LOCAL minimum wage laws can be a perverse incentive because they still let some businesses move to locations with lower wages, yet any NATIONAL minimum wage update has been blocked in Congress for many years.
In some ways I'm not surprised that the recent mishandling of the first Ebola case diagnosed in the USA was in Texas, since that is one of the epicenters of short-sighted cost-cutting and anti-regulatory thinking. Years of relentless cutting and curtailing of our national health infrastructure has left us poorly prepared to handle dangerous diseases despite years of warnings from people who looked at facts instead of fantasies.
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Eliza



Joined: 21 Aug 2011
Posts: 1196

PostPosted: Tue Oct 21, 2014 12:34 am    Post subject: Reply with quote

Quote:
The shrinking of government by the right-wing from Reaganomics through the Tea Party has led to deterioration of the commons in the USA that is approaching disastrous levels.
Many laws created in the last several decades create "perverse incentives", which lead people to act against their own best interests or against the best interests of society or humanity as a whole.


This. Exactly. A similar thing in the UK with similar timing from Thatcher through to the Tories. There are a number of books out now about the unraveling of democracy.
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