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The ISBF Blog

Basic Economics and How We Live It-The ISBF Gazette_Issue IX

Posted on June 19, 2018 by Navni Kothari  | Blog | Events | Media

This isn't one of those articles about the applications of rocket science concepts that prove economics to be an important science. This is just a link between those small things all of us know, or at least pretend to know, but choose to ignore. We presume life to be a liability we have been forced to credit to our account, evading the better-known fact that it is the magnanimous form of transfer income from the almighty himself. Never do we consume on our indifference curves because we are too busy plotting those of our friends, parents, relatives, boyfriends/ girlfriends, teachers and so on. Nevertheless, we always seem to find a way to consume at a point way above our budget constraints. We work, but just as we start, we can literally feel decreasing returns to scale setting in and so we decide to take it easy. As a result, the output is way below the PPC. We We dream of a day when Y will be equal to AE and fool ourselves to be approaching the equilibrium=m when the market of our lives is crashing. We ignore our demands and compromise to accommodate whatever is supplied and then wonder why our needs continue to be ignored. We find it convenient to deal with excess supply and cry about the missing masala when equilibrium is attained. If this was not enough, we assume our monopoly in a perfectly competitive world of human relations. So much so that we forget all about the benefits of specialization and fake the ability to build a self sufficient model of life, KEEPING ALL OTHER FACTORS CONSTANT! Then, it happens! The crisis of course! We begin wondering what was wrong, infuse some crap from an old self-help book that we can little comprehend and begin to calculate the opportunity cost of all we do. For some reason, factors initially exogenous to our model seem to cause a lot of movement and we decide to make them endogenous. This complicates our utility function even further as the money supply seems to be approaching zero. Then, we pray for a socialist government that would appear out of nowhere and impose a 100% tax on the income of a rich friend, who just feels like an enemy. We also expect this tax to be redistributed among our loved ones to raise our living standards from a weekly lunch at Barbeque Nation to one at Bukhara. In the end, we go to bed everyday, hoping for a miraculous growth, financial, psychological, emotional and intellectual, that would stun all analysts and create a more 'stable' economy, least realizing that life is our own model and we can press the refresh button whenever we want. 

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