Does studying economics make you happier?

Nikos Sp, a loyal MR reader, asks:

…ignoring the effect of becoming an economist
on your material welfare, do you believe that the economist’s mindset
is conducive to a happy life – or does a knowledge of economics lead to
a life of misery?

Nikos already has an answer, and yes he defends economics:

Here’s why:

1. I cherish my consumer surplus. I value most of the stuff I buy way more
than what I have to pay for them; vanilla ice cream makes me happy
beyond belief, and the same is true for the music of Dream Theater and
the (soon to be purchased) Apple iphone. And what am I asked to pay for them? Peanuts.

2. I cherish my producer surplus. I am getting paid way, way more than the
salary that would make me indifferent between supplying labour and
staying at home.

3. I never have regrets: I did the best I could given the information available to me at the time.
Judging I could have done better using information I acquired at a later date makes as much sense as regretting the existence of gravity. On a related topic, I understand the irrelevance of sunk costs.

4. While I do care for my welfare in relative terms, my welfare in absolute terms looms large in my utility function – and, boy, look how its value has been growing.

5. The selfishness of my fellow human beings does not make me anxious or depressed. Adam Smith
(or was it Mandeville?) taught me that humans, selfish as they are, can make happy societies. And perhaps more to the point, they can make me happy.

Just think, consumer surplus from your consumer surplus.  Only the fixed point theorem prevents him from reaching pure bliss.  Most generally, (good) economics insulates people from expecting the impossible, and that does make for greater happiness and contentment.  Do you all agree?

Comments

Damn fixed point theorem. It's the only thing I hate more than gravity.

The benefits Nikos cites sound for the most part like they could have been derived equally well from the contemplation of philosophy or study of religion.

I did the best I could given the information available to me at the time.

This is less and less true in the modern world. We have a surfeit of information, we are surrounded by data smog. Available information tends to infinity.

In many situations, it will be a given that you had access to all the information you needed. What you will regret is failing to do sufficient datamining and timely thoughtful analysis.

Yes. However, I am still human. That is to say that, understanding the
reality of tradeoffs and opportunity costs, I still struggle with
accepting that reality. I want to do A, B, and C but realize that if
I do B I can't do A and C. In short I struggle, like many humans struggle,\
with accepting that I am not God. Understanding prevents futile thinking
which contributes to unhappiness... so yea, I suppose understanding economics
is conducive to greater happiness.

I agree that "economics" make me happier, and the ideas he mentions ARE economics.

What I think makes a lot of people unhappy is the increasing volume of "high-brow" mumbo jumbo that one sees in the top-tier economic journals that has no connection to observational reality. For example a recent issue of the JPE has an article that has clone replacing people who match in matrimony "forever" after an initial encounter at a bars; one of the undiscussed implications of the cloning assumption, together with the assumption that matches last forever, is that the population expands without bound (of course in this model there is no budget constraint to preclude this). This stuff is NOT economics; it is what Friedman warned about in his methodology of econ. article "mathematics masquerading as economics." It appears that, in this (fortunately, unlike in most things), he was like John the Baptist: a voice in the wilderness.

While others complain about gasoline prices I think to myself, "I would pay twice as much if I had too". I wonder at capitalism. All these people working to bring me things its wonderful.

acknowledging sunk costs makes me happy, acknowledging opportunity costs makes me a little paranoid.

I think it is useful (and happiness-inducing) to know some economics. Considering how low the average knowledge is, it doesn't take much. Sunk costs, opportunity costs, remembering to price things in constant dollars - all of these are extremely useful ideas.

The "best information I had at the time" is also useful, as long (as pointed out above) it isn't used as an easy way out. You can arrive at a similar place through philosophy, though - I'm thinking of the Stoic distinction between things that are in your power and things that aren't. Used honestly, and not as a cop-out, this eliminates futile regrets in much the same way. (And no, my wife doesn't understand it one bit!)

I agree that I am much happier knowing a little bit about economics than not. But after just getting back from a drive to a fast food place to pick up some lunch for myself and a couple coworkers, I have to say that knowing economics enhances some frustration.

Here's what I mean:
Everyone on the road has their own motives, but we generally expect the roads to be safe and the travel time to be quick. We have established rules of the road as well as long-established customs that are used to keep things safe and quick. And so I look at driving as a matter of signalling and pattern coordination. I become amazed at how many people through sheer ignorance or stupidity make for suboptimal driving conditions for everyone.

And so on my quick 15-minute trip, I was encountered by a person that swerved into my lane without a turn signal which caused me to slam on the breaks. I had someone drive 10 miles an hour slower than traffic for seemingly no reason at all. While making a left-hand turn, two people going the other way did not use their turn signals to make a right, which forced me to wait an additional minute or sitting in the turn lane. And don't get me started on the parking lot.

Would I have been annoyed without knowing economics? Probably. But knowing a little bit about it accentuated the aggravation.

Being technical again, but offhand I do not see a necessary reason
why any fixed point theorem necessarily keeps one from being at one's
bliss point. Well, of course, to be on one's bliss point it needs to
be inside one's budget constraint. But, if one is inside one's budget
constraint, one is violating Walras' Law, which is usually used to insure
easy application of a fixed point theorem for proving the existence of a
competitive general equilibrium. However, it is OK if one's bliss point
just happens to lie on one's budget constraint. But, of course, such a
case is measure zero, and therefore only infinitesimally likely, although
not utterly impossible.

Re: Floccina
Good point, I too would pay double for gas-because it's worth it. I often frustrate my friends when I mock their complaining by saying "Why don't you just take the bus?"

Another great thing about sunk costs: when I try new (fill in blank with just about anything) that I don't like or that I don't find very good, I just throw it away, this happens especially with food.

Economics would have made me happy if ecology hadn't sent me into a clinical depression.

WAIT! Economics makes us happier because it imposes a rational self on our true self. And we fool ourselves into thinking that because the rational self is "ok", we are happy.

Not entirely.

I personally study fairness and jealousy in negotiations. I find (and this finding has been already reported in similar contexts) that consumer surplus matters, but if my neighbour got a better deal, I am no happy. If the surplus from work is positive, good. But if my neighbour makes more money with less work ... AAARRRGGGHH. Same the other way around: something bad happens, but someone else is worse off and you feel ok.

So, by using the economic argument, we tell ourselves: take it easy, your surplus is still positive, be content.

My point: we are not happier. By using economic arguments (or learning economics, as the post puts it) we are replacing happiness. We are **altering** the idea of happiness. We are forcing ourselves into the happiness of the rational agent.

I hope you like this idea, even if you disagree with it.

This is going to be very personal.
I'm studying economics, became an absolyt econgeek reading papers and blogs in my free time.
But economics is making me sad, not happy. All my friends are from the far left, and even though we still share lots of afinities, I can't share my passion for economics with them.
Remember Tabarrok, when he met this friend of him who was surprised that he studied economics, because "He used to be such a creative person"...

People don't understand economists, they read Naomi Klein. And when you try to explain them, well you are a heartless far right asshole.

I didn't expect to agree, but after reading the list, I do.

Weighing against this is a constant frustration with the lack of understanding that surrounds me (Water shortage? The answer couldn't possibly be to raise the price of water!) but on net I'd say it's positive.

The sunk cost fallacy: http://en.wikipedia.org/wiki/Sunk_cost_fallacy#Loss_aversion_and_the_sunk_cost_fallacy

I believe that there are some things that you will feel happy about if you think about them from the mindset of an economist. There are also some things that you might not be so happy about if you think about them from the view point from the mind of an economist. Information that we are given about our economy is vague and misleading even in some cases. It is hard to make a decision on if you would be happy or not if you thought about things from the mindset of an economist. Economists still do not have answers to some of the questions that they have been trying to answer for ages. I do not know if I would be happy or not if I looked at everything from the perspective of an economist.

I never have regrets: I did the best I could given the information available to me at the time.

Surely in the long run there are times when it is beneficial to feel regret. If you really did make the best decision with information available then that's fine and you need have no regrets. But if in retrospect you can fault your thinking process or your approach to a problem then to regret is perhaps good. The mental anguish associated with the error will make it less likely that you will repeat it.

Yes, I agree. Thanks for writing this blog, it is exquisite.

The issue of course - on this of all blogs - is does economics make me happier - rather than happy, or conversely would an absence of economics make me less happy by some increment, which requires a "compared with what?" My difficulty is that I have been soaked in the economic way of thinking and trying to improve myself in practicing it that I have no objective counterfactual anymore - and I'm not about to return to the pursuit of some dark art to find one. All I can say then to the question, does economics make me happier is - evidently.

So why has the term "dismal science" lasted? Why aren't economists the life of the party -- known for their warmth, love, compassion, and good humor?

This is a little sophmoric of an analysis, Economic theory largely rests upon the shoulders of two glaringly false assumptions which have dire effects on their applicability in the real world. Chiefly the assumptions of rational agents and perfect information in free market competition, which are both equally asymptotic assumptions in the real world, neither can ever be fully realized, you can get close, but the bulk of your probability curve isn't going to be anywhere near it.

Very grateful to a bunch of much better skills. I look forward to reading more of the future of the subject. Keep the good work。thanks!

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