What economic decisions am I already making?
This morning, you decided what time to get up, whether or not to go to work, what to have to eat, and whether to go for a jog or laze on the sofa. Each of those decisions in some way affected the economy, and had some form of conscious, or subconscious, economic thinking behind it.
What’s the economy, and what’s economics?
Economics is just seven billion stories, experiences, and choices. It’s about what we have, what we make, and what we need. The nitty gritty of what this really means is something that economists have always argued over, and will always argue over. There’s no way of pinning down a right answer to economics without an understanding of the diversity of everybody’s daily lives.
Are all my decisions related to the economy?
The word ‘economic’ has a double meaning: Thrifty being one, which is justified in terms of profitability, and the second being anything that’s related to the economy. So do all our decisions have to be thrifty? No. But are they all related to the economy? Mostly.
How do we decide what we want?
So how do economists think we make choices? Some economists say we decide based on comparing the relative satisfaction we’d get from two options; they call this utility. Others say it depends on the situation – in a single day, we might be a customer, a manager, an employee, a taxpayer, and a volunteer, and we’ll decide differently based on which role we’re playing in a particular decision.
What kind of decision-maker am I?
So is there any way to generalize how we make decisions? Some economists say that by and large, we’re rational, well-informed, self-interested human beings; others think we’re irrational, ill-informed, and motivated by a whole bunch of things other than ourselves. Which one economists lean closer to determines how they predict our behavior and the policy they write, so it’s worth finding out what assumptions they’re making about us, and whether we’re on board with them.