Fork in the Road: Thinking small has big consequences
While my brainwaves have always seemed to be more in tide with my artistic passionate side, I’m a firm believer that an important component of life satisfaction derives from ongoing learning and personal development. In other words, having a sense of fulfillment in one’s life comes from far more than the accumulation of various material items and/or the accomplishment of various life stages and career milestones. To be challenged is to live. To feel stimulated and be forced to reconfigure your viewpoints based on new learnings is to be alive. To willingly explore new areas of yourself and the world at large is to be mature. To never conclude you know enough – or everything for that matter – is just the beginning, and an important one at that.
So why economics of all things? Because I couldn’t think of another subject that contrasts more with my firmly held notions of the world – or so I thought.
I’ve never considered myself a dollars and cents kind of gal. Instead, as a student of the social sciences, I regularly find myself engaged in debates of what’s fair, what’s just and what’s right, with capitalism often being labelled as the enemy. Economics doesn’t have time for those kinds of value judgements. Instead, it is a science that deliberately detaches itself from emotion in favour of logic and objectivity.
Economics is concerned with the study of efficient resource allocation and is rooted on the dual premise that a) resources are scarce and b) our wants will always outweigh what is available. With this in mind, economic theory proposes that free market capitalism and trade – as opposed to systems based on government intervention and restrictions – is the best way to address both of the above issues, believe it or not.
Trying to wrap my head around all this at first was quite difficult. But the more I invested into educating myself on the topic, the more I came to understand that I, like many who have deeply held beliefs about the evils of capitalism, made a critical error when forming my opinion – I used reductionist thinking.
Let’s assume a craze breaks out over the latest widget produced by Company B. Because of the industry-specific nature of the widget, let’s also assume that it is exclusively available at a single specialty store in your given locale. As a consumer, you decide to wait a couple of weeks to obtain your widget to avoid the long lines at the store. Your friend Betty tells you she was able to buy hers for $75 last week, but when you head over to the store today you see the same widget she just got has now been marked up to $110.
If you subscribe to reductionist thinking, you will instantly conclude the storeowner, having acknowledged he has a monopoly over the sale of the widget in the area, is being driven by greed to line his/her pockets a little deeper. An economist would ask you to consider what other factors are at play.
Is it possible that the popularity of the widget is not just specific to your locale, but instead is a worldwide phenomenon, which is resulting in an imbalance between supply and demand, and the manufacturers of the widget cannot keep up and so have accordingly raised its per-unit costs to the vendors?
Is it possible that the widget’s country of origin has decided to raise the fees associated with the importation of its product, resulting in lower profit margins for the storeowner should he/she not alter his/her established price point?
Is it possible that a competitor from another industry has contracted the use of the same natural resources used in the production of the widget for an alternate use at a higher price, therefore driving up the costs of those natural resources across the board?
Was the original price point set as a time-sensitive promotion where the store owner was willing to take a lower profit margin in favour of pushing more product during the first two weeks of the product’s release?
Just as its denotation would suggest, reductionist thinking causes you to think too small. The irony of all this, for me, is the fact that the reason I first got involved with writing editorial pieces is because I love tearing apart issues from different angles.
Beyond learning something valuable myself, my study into the realm of production and consumption has a valuable lesson for all of you:
Now, more than ever, we live in a highly interconnected and integrated world wherein actions undergone by individuals who seem a world away have real consequences right here at home. Economics, therefore, is not simply the study of production and consumption habits. Rather, it is a way of thinking in which one acknowledges just how much everything is tied together.