Friday, November 11, 2011

The demands of continuous existence.

Here's a question for economists out there.

Would economics examples be significantly different if we start off understanding that people have a continuous demand for consumables such as food with no elasticity as we approach starvation?  Do assumptions such as maximization and rationality still work the same way?  What else changes?  Does this cause discontinuities in models?  This is a very important question for the 99% in many countries, and for close to 40% in the USA.

I don't know: I'm not an economist.  If you don't have some sort of formal economics credentials, but insist on answering, please explain why you are qualified to answer.


Anonymous said...

I'm not an economist either, but economics textbooks tend not to use "luxury" and "necessity" as economic terminology, even when modeling consumer choice and utility. Instead they use what seems to me to be in poor taste: "preferred goods" and "substitute goods." In an attempt to counter this spin by stating the obvious, I coined the term "survivable market basket."

Joanna Liberation said...

I'm not an economist so I have no idea how to create mathematical models with no relation to reality. I do have common sense though, does that count? Common sense says the fact that people have to eat or else die makes the rationality assumption seem more true than otherwise (not that it is true, eg Austrian School claims people are usually irrational). I mean, you can't really live in fantasy world to survive in such reality. On the other hand, your assumption that starvation applies to so many people borders on idiotic. The poorest countries happen to have the highest population growth and the poorest in USA are the most obese rather than starved, just check some stats before you write such rubbish.

Mike Huben said...

No, common sense does not count: as Einstein pointed out "Common sense is the collection of prejudices acquired by age eighteen." Maybe you learned some new prejudices at an older age too. The whole idea of science is to move beyond "common sense".

For example, your "Common sense says the fact that people have to eat or else die makes the rationality assumption seem more true than otherwise" statement then suggests that every organism fits the rationality assumption. Your rationality might then be at the level of a pig's.

Now, you say to check statistics: go ahead.

Here's a one-page summary of hunger and poverty facts:

Most Americans (51.4 percent) will live in poverty at some point before age 65.

14.6% of U.S. households struggle to put enough food on the table. More than 49 million Americans—including 16.7 million children—live in these households.

It can be much worse in other parts of the world.

And if you knew anything about correlations between poverty and population growth, you'd know that reduced poverty correlates with reduced population growth.

As for obesity, you doubtless misunderstand why the poor are often obese. The Link Between Poverty, Obesity and Diabetes.

Chris said...

These are great questions. Another one I'd ask economists is this: Is anyone working on thinking up viable economic models for a society (or world) in which the population level is stagnant or declining? And is not based so primarily on the production of "new" stuff all the time?

With finite space and resources, we should be planning for these eventualities. Indeed, as you note, as people (especially women) become more educated, more empowered, and less impoverished, the birthrate goes down. Perhaps, if things go so favourably for the world, a better economic balance will become possible. But is anyone thinking about what this would look like?

onto logical shock said...

(Engineer): if you want a new model then you would be better placed to ask an Engineer,they are at least more or less realists, too bad economists rule the world...