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Or that people don't get graduate degrees with the intent of maximizing their earnings potential. I've often heard it said that the fundamental problem with ec
by sprout 16y ago
Or that people don't get graduate degrees with the intent of maximizing their earnings potential.
I've often heard it said that the fundamental problem with economics is that it assumes people are rational and have good information. I'd say it goes deeper than that: it assumes that money is the rational thing for a person to maximize. In reality, money is something that bears some maximization, but it's hardly the primary consideration.
- achompas 16y agoEconomics doesn't assume everyone wants to maximize money. It assumes everyone wants to maximize utility, and then uses money as a (poor) proxy for utility. It's a subtle, important difference.
- ghb 16y agoSerious question: what's utility?
- achompas 16y agoWikipedia calls it "relative satisfaction." I'd call it "personal benefit or gain." Considering that, it's clear why we'd use money as a proxy. Not a perfect one, of course.
- sprout 16y agoPeople want to maximize utility, we'll use money as a proxy, people want to maximize money. I suppose there are economic schools of thought that use other proxies for utility, but you seem to be agreeing with me insofar as the primary stand-in for utility is money, and it is a poor one.
- achompas 16y agoNo, that was my exact point. In general, economics treats money and utility as distinct. I should've been clearer: money only proxies for utility in behavioral experiments. Labor supply theory, for example, assumes people maximize utility by choosing a combination of work and leisure. It doesn't assume people work as much as possible (or, maximize their money).