Tag Archives: new york times

The Art of Rational Decision-Making

Economics is generally based on the assumption that people are able to make rational decisions based on weighing all the costs and benefits of something. An individual may take into account things like fixed costs and variable costs. There are opportunity costs. For example, if I decide to go to a concert instead of study for an exam then I probably think that the benefit I get out of going to that concert outweighs the costs of getting a poor grade on the exam. But what if there are costs that I don’t factor into my decision-making? Am I still making a rational choice based on the information available to me? Or am I choosing to ignore certain costs because they’re too abstract or too difficult to quantify?

Very often this kind of problem is the result of external costs, those costs that one doesn’t consider when making decisions, as opposed to internal costs or out-of-pocket costs. Continue reading

Why We’re Still Struggling

Two articles reporting on relatively similar things.  The first being the one from the Hamburger Abendblatt (in German,) reporting that a third of Germany”s automobile commuters could imagine that in the relatively near future they would get rid of their car, or at least leave it at home.  Then this article in the New York Times, reporting about how some people in the U.S. are willing to think about living without a car, but with more emphasis on what a difficult time car dealerships and manufacturers are having and how and when we’ll be back to record breaking numbers of car purchases.

First though, a bit of a run through on things I found interesting in the Hamburger Abendblatt article.  The statistics aren’t necessarily so indicative of the situation in Hamburg.  Continue reading