Why I Love Economics: Decoding Human Behavior and the Economy

Over the past decade, I've delved into the world of economics without even realizing it. My initial motivation was simply observing and documenting the actions and behaviors of people around me, a quest to understand the Why behind their actions. This curiosity naturally led me to the study of human behavior and economics, complemented by my journey into philosophy.

The Human Factor

Even the IQ bell curve is more nuanced than just measuring pure intelligence. While most of the population is clustered around the average, the tails of the distribution represent individuals who are vastly different. 70% of the population shares a similar baseline, while the remaining 30% varies significantly. The further a person deviates from the average, the more unique they become.

The challenge lies in how to stand out. If a small variation exists within a large group, it can be difficult to distinguish oneself. For instance, imagine a car dealership where all the cars are the same shade of red. The cars at the bottom end of the spectrum are often described as having flaws and are considered cheap, whereas the cars at the top are seen as too expensive and exotic. This can be likened to a baseline economics concept.

The key is to introduce variables that allow differentiation. For example, changing the color of half the cars to blue can help 50% of the people stand out. Adding unique features, such as style or an unconventional number of doors, can further diversify the offerings and cater to a broader audience. These factors are crucial in economics as they provide solutions that cater to a wide range of needs and preferences.

The Reality Factor

While the economy provides a myriad of solutions, the real-world is not inherently beautiful. It is, however, rich in complexity and diversity. Productivity, when measured on a personal or human development scale, is linear. As a species, our overall productivity also follows this trend.

However, there is a downside to this linear productivity. Most endeavors require effort and progress at a rate that is typically twice as fast as productivity. This means that if your efforts result in a linear increase in productivity, you might still be falling behind due to the rate at which challenges and opportunities appear. Understanding this dynamic is crucial in managing expectations and setting realistic goals.

Reality also introduces factors such as external forces that are not man-made, including natural and environmental influences. These forces, along with the rules they follow, also play a significant role in shaping the economy. Moreover, there are rules inherent to reality that influence our actions and decisions. Recognizing these factors helps in understanding the complexities of the economy and human behavior.

The Enduring Interest in Economics

What keeps me intrigued about economics is its ability to reveal the underlying patterns of human behavior and societal structures over a long period. Initially, understanding the complexity and interconnectedness of these systems seemed daunting. Over time, however, as I analyzed the nuances of economic behavior and societal trends, the patterns began to become clearer.

The questions that linger on are why we are never satisfied with what we have and why we have such a strong urge to progress. As a species, we continue to evolve and adapt, and economics provides a framework to understand these dynamics. It is through the study of human behavior in economic contexts that we can better navigate the challenges and opportunities that lie ahead.

Economics is not just a study of markets and financial systems; it is a profound exploration of human nature and the mechanisms that shape our collective destiny.