ECONomics

This is what happens when you drop out of econ 101 halfway through:

When you make a few hundred dollars an hour, it costs you more to mow your own lawn than it does just to pay someone to do it for you. Of course, this simple math is something that most of the 99% never get.

This tool has apparently never heard of opportunity costs. It only costs you more to mow your lawn if the alternative would cost more than doing it yourself. Basically, this will only happen if you take (non-paid) time off from work to mow your lawn. If you don’t work on weekends, you can mow your lawn then and your opportunity costs will be zero, in terms of foregone work/pay. Mowing your lawn is only a money-losing proposition if the only way to mow your lawn is foregoing earning a paycheck. This is not something most nine-to-fivers face.

This reminds me of another example that was cited in one of my college classes (econ 195, to be precise). My professor had apparently calculated the net wealth of Bill Gates and determined that he earned approximately $4.8 million per hour (approximately $1,333 per second) and, as such, it would be a waste of his time to pick up a one hundred dollar bill that he happened to pass by on the street. This analysis, like a lot of modern economic analysis, is too clever by half.

Actually, it’s not clever at all. Net wealth and income are not the same, and therefore Bill Gates does not earn $1,333 per second. He has (had) $42 billion dollars, period, and that simply exists; it is not earned. Not only that, if he’s walking down the street, he’s clearly not working (unless he’s getting paid to walk down the street). As such, his opportunity costs are zero, in terms of money earned because he is not currently engaged in money-earning activity. Thus, it is clearly within his best pecuniary interests to pick up a one hundred dollar bill, since doing so will increase his net wealth by one hundred dollars.

At any rate, both of these analyses are evidence of what I like to call eCONomics. Essentially, all you need to practice eCONomics is a poor grasp of opportunity costs and the ability to conflate terms and reason badly. Basically, be like Paul Krugman (zing!) and you can be a successful eCONomist.

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