They say that in life we are motivated by only two things - we either do things to seek pleasure or to avoid pain. Closely related to these are the values that we live for, which are things like passion, integrity, success, basically what I would call states of emotions that we think are highly important to us because achieving these states will give us utmost personal pleasure.
For me, the desire to study economics has evolved over time. In the beginning I was basically motivated by the desire to score good grades and the challenge it presented. Economics is widely touted as a difficult subject at the A-levels (which I think is a highly limiting belief and not true at all) and so I basically viewed it as a challenge that I have to do well in it. Over time as I got myself deeper and deeper down the rabbit hole, I started to realise just how much I liked the subject for its logic and rationality and how the subject attempts to quantify and explain the complex world that we live in with some basic models and theories. The idea that we could somehow explain the uncertainty of our environment and the development of mankind as a whole seemed highly intriguing to me.
A chemist, a physicist, and an economist are all trapped on a desert island, trying to figure out how to open a can of food.
“Let’s heat the can over the fire until it explodes,” says the chemist.
“No, no,” says the physicist, “let’s drop the can onto the rocks from the top of a high tree.”
“I have an idea,”says the economist. “First,we assume a can opener ...”
Yet today, the motivation has changed. Now I see economics has being a highly flawed science that attempts to model complexity by introducing simplifying assumptions which inevitably leads to distorted results. For example, the basic tenet of rationality which states economic agents do things to maximise individual welfare coupled with the assumption of perfect information leads to the conclusion of efficient allocation of goods and services under a free market. Yet, we see that in the real world, the power of corporations can often influence markets and distort wages.
In some sense, economics creates a self-fulfilling prophecy by creating the justifications for self-seeking behaviour - this idea that somehow a group of individuals each seeking his own selfish gains can lead to ultimate social good. We see how this sort of thinking has led to the moral hazards that created the financial crisis in the recent years (as well as the many financial crisis in the past). Governments are not an answer either, because they can either fail or be influenced by private interests especially those of large corporations. My intuition tells me that there is something wrong with the underlying theory. I am not able to prove it right now, but it is something along the lines that capitalism is inherently unstable if it operates from the principles of self-maximising behaviour. In other words, economies do not tend towards equilibrium and the free market is not efficient much of the time. We have to change the rules of the game, partly by influencing how people view their role in society and partly by rewriting the rules of capitalism.
I am not saying that altruism is the way to go, nor am I supporting communism or socialism. What I think is that human development has come to a stage where we need to reexamine the principles of economics and perhaps by doing so we can influence how people think and approach problems in life. Economics should not be mixed with moral issues but it does have a huge bearing over how many people act and behave in everyday life. Right now the challenge is to somehow prove all that I am saying here mathematically (yes, that's what economics is about) and that is what is motivating me to study the subject right now.
Perhaps you feel that economics is not your cup of tea, but before you decide to stay away from the subject altogether, I suggest that you look at some of the links that I have for you that can possibly change your mind and provide some source of motivation!
1. 60 second adventures in economics
Pretty brilliant videos that explain economics in a concise manner and are actually impressively accurate.
Free lectures made by a passionate bunch. They are of pretty good quality and should be a useful resource for anyone interested to find out learn more about economics.
The site provides many useful resources in exchange for your email address to be added to their mailing list. You definitely would want to check this one out if you are trying to discover your life purpose (whether it is economics related or not).
Till next time, dream economics.
Yes, it is about understanding the potential inefficiencies, but I am thinking of approaching the idea from a different perspective by asking the question - Is it fundamentally correct to say that a pursuit of self interest will lead to efficient outcomes in the markets. If it can be proven that rational behaviour at the individual level leads to mass instability through some form of network theory application then the whole economic theory can be revamped to start from different basic assumptions. But these are just ideas for now... Long way to go.
A fascinating post. I take your point about the flaws in traditional models of economics and the fact that overreliance on these models contributed to the crash, but isn't modern economics also about accepting and understanding the potential inefficiencies and irrationality or the once-sacrosanct market?
Thanks for looking at my blog by the way, as you can see I do think that a basic understanding of economics might have hoed over the last decade!
This question was posed to eight of the world's top young economists, and here are their responses compiled:
Personally, I think economics as a discipline will transform in the following three ways:
According to Paul Krugman, the United States and the Eurozone are in a depression right now! Keynes described in the 1930s that depression is ' a chronic condition of subnormal activity for a considerable period without any marked tendency either towards recovery or towards complete collapse'. It will take some time for countries and governments to realise that cutting government projects, reining in fiscal spending or enforcing fiscal austerity are not going to result in growth. The fallacy at play here is that if governments cut back on their spending, it will mean that more funds will be available for the private sector to consume and invest with. However, one of the fundamental rules of Keynesian economics is forgotten here: one person's spending is another's income. Demand is simply too low in the economy when both the private and public sector reduce spending at the same time.
Ideas such as rational irrationality, where an individual may make a decision based on available information that is rational from his or her perspective but the eventual outcome on society turns out to be irrational when everyone makes that same decision, will be examined in greater detail. There will also be a greater reliance on empirical data rather than theoretical models and the mathematical elegance of their proofs. This means that issues such as information constraints and cognitive biases associated with decision making will be gradually brought into the forefront of economics research.
The largest mental gains I made in the shortest period of time were from studying rationality.
I was amazed to discover a couple years ago that there were people who regularly studied and discussed how to think, how to get correct and accurate beliefs about how the world works, how to understand how your mind works, and to get at the real reasons people make decisions.
The whole rationality thing is as addictive as crack-cocaine for me. I love it. The difference from crack, though, is you grow stronger and smarter the more you dive in.
Our minds are funny. We humans, we're "adaptation exercisers, not fitness maximizers" -
Fifty thousand years ago, the taste buds of Homo sapiens directed their bearers to the scarcest, most critical food resources - sugar and fat. Calories, in a word. Today, the context of a taste bud's function has changed, but the taste buds themselves have not. Calories, far from being scarce (in First World countries), are actively harmful. Micronutrients that were reliably abundant in leaves and nuts are absent from bread, but our taste buds don't complain. A scoop of ice cream is a superstimulus, containing more sugar, fat, and salt than anything in the ancestral environment.