Friday, October 26, 2007

Does knowledge of economics make you happier?

The read of the week. The author of Bluematter is "[a]n occasionally tactless economist [who] opines on economics, politics and everything else. " And who choses to remain anonymous on the following grounds: "This blog reflects my personal views and is in no way representative of those of my employer or my mum. To make sure no misunderstanding arises and their lives stay stress-free, I will remain anonymous." Brilliant, concise and simply brilliant!

But here's the gist of his answer to the question we are all interested in (I couldn't have phrased this better and for the moment I can't think of anything to add to it):

"...the answer is yes. Here's why:

1. I cherish my consumer surplus. I value most of the stuff I buy way more than what I have to pay for them; vanilla ice cream makes me happy beyond belief, and the same is true for the music of Dream Theater and the (soon to be purchased) Apple iphone. And what am I asked to pay for them? Peanuts.

2. I cherish my producer surplus. I am getting paid way, way more than the salary that would make me indifferent between supplying labour and staying at home.

3. I never have regrets: I did the best I could given the information available to me at the time. Judging I could have done better using information I acquired at a later date makes as much sense as regretting the existence of gravity. On a related topic, I understand the irrelevance of sunk costs.

4. While I do care for my welfare in relative terms, my welfare in absolute terms looms large in my utility function - and, boy, look how its value has been growing.

5. The selfishness of my fellow human beings does not make me anxious or depressed. Adam Smith (or was it Mandeville?) taught me that humans, selfish as they are, can make happy societies. And perhaps more to the point, they can make me happy.

Found about the above via Tyler Cowen, on MR. And we have to give Tyler the credit for his equally brilliant conclusion: "Only the fixed point theorem prevents him from reaching pure bliss." :-)

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