Sunday, December 11, 2011

Economic Principles outside Economics

Although most people would deny it, economic principles apply in many areas of human life, beyond the labor market and the shopping market. Most people do not think of it in this way, but exchanges of value occur in every aspect of life. Perhaps that is why Ludwig von Mises referred to the subject as "Praxeology" instead of "Economics" because Praxeology is the study of human action. Praxeology studies what people do, in contrast to Psychology which studies what people think.

The simple act of who a person chooses as a friend to spend time with is in this sense an economic decision. When a person chooses a friend, the person says "you have sufficient value to me that I consider you worthy of the investment in time and emotion." As Ayn Rand noted, a person would not choose a friend who does not reflect the values of that person, but this can be expanded through an economic perspective.

A person would not invest with someone beneath them, and would be unlikely to achieve that investment from someone far above them. Of course value is relative, so therefore the terms "above" and "beneath" are relative as well, so that statement does not imply that there is an objective system of values that says some people are intrinsically better than others.

This is even more true in more intimate relationships. It is true that if someone were desperate enough that a sexual partner could be easily found, but there are many who would never lower themselves to the necessary level simply for some physical satisfaction. A persons body is a commodity that is not shared freely, but is instead traded with those who a person feels worthy of the trade.

Social activities outside of work and family reflect economic decisions as well. Some people are involved in religious activities, others in athletics, others in community artistic endeavors, and yet others in politics. The choice one makes are an investment of time at the expense of the opportunity cost of other activities.

This isn’t news to anyone who has studied the basics of economics, which includes all libertarians. Why therefore does it need to be stated? Because while most people have various economic beliefs other than laissez faire, they do not practice those other beliefs in their own lives. And their failure to do so, and what they actually practice, should be noted to them.

There are some ways this is done contrasting capitalism and socialism, such as various stories about students sharing grades. But that fails to capture the full range of economic ideologies, leaving out most notably Kenyesian and Welfarist economics. That leaves only the question of how one would apply those decision making theories to the decisions that take place outside of the labor market and the shopping market.

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