Ways you can use economics in your personal life

 

I remember countless times I would doze off in several economics classes. However, I remember this lecturer who would use history and politics to make the laws of demand and supply and the graphs thereof, more relatable. Economics is a social science concerned with production, distribution, and consumption of both goods and services. Application of economics involves allocation of scarce resources by individuals, firms, government and societies. 

Economics is the way we live and how our brains are wired to make the most optimal decisions. Economics explains how we seek the most optimal utility in all the decision we make. However, our brains are also wired to make the easiest of choices and take shortcuts. That would explain why most people resort to addictive habits and substances to get temporary thrills instead of seeking their dopamine rush from work, adventure, seeking new lovers, and pursuit of dreams.

Probably fear is an economics function that seeks to reduce resources, time and risk, thereby limiting us from realizing the fullness out of life. Due to the uncertainties occasioned by Corona Virus, the fear has tripled due to lost businesses and incomes. Our subconscious minds resort to fear to ensure the minimal resources do not get depleted. 

A significant number of people today, who have always used lack of enough resources as an excuse not to go for that holiday, start a business, do that degree or take someone out, are realizing that they have had the resources all along. It was their scarcity mentality and fear that held them back.

Behavioral economics demonstrate that, as humans we are not rational utility maximizers. Why else do we binge on sugar, fast food, drugs, social media and movies? Sadly we do not calculate our decisions to maximize our socioeconomic welfare. 

We spend money on frivolous and superficial stuff, which only give temporal pleasure, but at a significant cost to our bank accounts. As it were, most businesses and brands would go under if we were rational utility maximizers. Even in investment, most investors are triggered by irrational exuberance, thus investing in overpriced assets.

How do we then optimize resource allocation, distribution and production, while minimizing on consumption without living scared? We must develop new habits that reduce opportunity costs in optimizing time, maximizing utility while reducing on the behavioral biases, planning for inflation and increasing our productivity at work, in the home and in our leisure times.

While there is no one-size-fit-all, in our diverse worlds; we can optimize value and utility through questioning the results of all our decisions and the opportunity costs from procrastination and bad decisions. 

As a parent, you should economics to encourage your kids to study more and work hard in sharpening their skills, thereby forgoing short term rewards for more long term rewards. I would rather my dad told me that I may live and die poor if I played around too much instead of the shouting and spanking that we received then. Not that I fault him too much, I was trouble!

Even in our social lives, we should be investing care, compassion, time and kind words to receive the returns we expect. This analogy however assumes that you have relations with someone as invested as you, and not a one-sided entanglement so prevalent in our hook-up culture. Sadly, some people walk around with an entitlement the size of Texas, while investing minimally in their social lives. 

To achieve better returns, we must however deal with high value humans and this implies we must be better humans as well. We should divest from junk relationships, however seductive and appealing they may be. They say, junk in, junk out, unless of course you control the market. Our expectations must be realistic otherwise disappointments will pursue you like a shadow. One must work towards having a profitable social equation.

Go forth; make informed investments, seek ye better utility, produce more, make opportunity savings and increase your ultimate value.

To more optimal living.