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The failing premise

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I sit here pondering the more fundamental theories of my career in economics. Today being a rainy day, and like many a rainy day I am stuck with the enjoyment of even more time spent indoors. Usually rain will not deter me from spending some time outside but given the winter seasonal temperatures ensure that this rain is of the cold and icy variety, I am reluctant to find anything productive to do on the other side of the front door.

Imagine if you will dear reader, this United States citizen, sitting on his couch with nothing more than the lights of the Christmas tree and the sounds of his sleeping dog and cats at his side for companionship. It is these moments I cherish for their uncanny ability to combine thoughts in my mind and create doubt about the premises many people take for granted in our modern world. I am left considering and debating the validity of this economic nugget of wisdom:

“The Actor/Actress in an economic system (ie consumer, producer..etc) is a rational person who follows the laws of economics and price theory.”

A more flawed assumption I can not find. This premise forms the basis of further economic theory and gives us many bodies of assumed knowledge. The problem is that people are not rational and most certainly do not follow the laws of economics and price theory. People (men and women) are more often then not, the slaves of their emotions, their hormones, virtues and vices, and above all: their genetic predispositions. It is those characteristics and the study of why people do what they do and how it relates to the world of price theory that matter more to the economic model.

Think about your world for a moment. How many of you know alcoholics, gamblers, prostitutes, stalkers, sex addicts of one variety or another? These people represent extremes of human behavior that we all possess to some degree. The study of human tendency and propensity to pursue the irrational (such as love) will do more to benefit the future of economic theory than any premise so flawed as what was assumed to exist.

It is time for a new economic model to be built around a more viable premise that takes into account a thorough analysis of humanity as humans and not as economic robots. Only when we include these items (like herding tendencies) can we better understand the monetary world around us.


Written by Josecito

December 20, 2011 at 7:14 pm

Posted in Uncategorized

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