Why Nothing Is Ever Certain When in EconomicsEssay Preview: Why Nothing Is Ever Certain When in EconomicsReport this essayOne of the reasons why so many people find it hard to grasp the concept of economics is that it involves few certainties. A question of how to best approach globalization broached to one half of a group of economists would yield one answer and the same question posed to the other half could be completely different. As Charles Wheelan states at the beginning of Naked Economics: Undressing the Dismal Science, “Economics starts with one important assumption: individuals act to make themselves as well off as possible” (Wheelan 6), which explains why the answer to any economics question is “it depends.” As people change over time and across cultures, so do economics; Wheelan emphasizes this relationship in Naked Economics by analyzing a plethora of examples in which the very economy is based upon human interaction.
Early on Wheelan approaches the concept of maximizing utility as a constant force on a nations economy. As Wheelan states, “most of the benefits of having a large family have disappeared in the industrialized world” (Wheelan 11), in response to falling birth rates. While this may be bad for the United States, a child living in such an industrialized nation is not needed to work on a farm or work in a factory to provide for the family–and the costs of raising a child in addition to a possible job loss is devastating. Therefore, families have maximized utility by only having one or two children, a movement that has had a profound effect on the economy.
One example Wheelan uses to demonstrate how incentives affect human behavior in the pursuit of utility, in turn affecting the economy, is the poaching of black rhinos. “A single rhino horn can fetch $30,000 on the black market” (Wheelan 23), which makes for a tumultuous trade in which more rhinos are killed only to have the price skyrocket. Here the incentive would consist of cutting of the rhinos nose before it is poached–theoretically saving its life so that the population might stabilize and keep the cost of rhino horns from reaching epic proportions. Then again, Wheelan notes, many hornless rhinos are killed anyway because it “saves the poachers from wasting time tracking the same animal again” (Wheelan 26). Once again, the unpredictability of human behavior has all but nullified one possible incentive in favor of maximizing utility.
Even in the seemingly callous realms of business and information, human interface profoundly affects how anything is implemented. “Branding,” Wheelan writes, is where “companies spend enormous sums of money to build an identity for their products,” and he continues, “Branding helps to provide an element of trust that is necessary for a complex economy to function” (Wheelan 91). The best and most prominent example Wheelan employs is that of McDonalds and its golden arches. Once a business has established trust between itself and the people, it creates a virtual monopoly in which people will choose McDonalds because they are familiar with the restaurant and everything in it. As Wheelan writes, “McDonalds sells hamburgers, fries, and most important, predictability.” While McDonalds
is a company built to keep customers happy and happy for their own good, it’s also a company that has tried to market itself as trustworthy. In fact, it often has gotten the “big bad” in customers who are upset by the size or performance of their companies.“
To create a competitive industry where customer trust was an element of success, there were several ways businesses could create leverage. Wheelan has a number of examples in the book of why and how he did it:
“In 1950s the Federal government allowed a company to buy (not buy) a lot of lumber for a lot of other companies. The companies who were being told to buy the lumber had to have an operating budget, which was $15-20 million a year by then. The government allowed the big lumber companies to keep their operating budget even though the companies only needed about $10 million a year to spend in order to operate. And that’s the way the business has worked for a long time.”\“
Now that the large-scale commercial and residential sectors, where the competition will be fierce, have gained significant financial and strategic benefits, large-scale commercial and commercial real estate is starting to become a necessary part of this paradigm.“ Wheelan explains how “the big banks are making money on credit. Credit is a natural outgrowth of consumer need and demand.”“ The banks can afford to move business around, without being forced into a relationship with the rest of businesses. “ „ ; ․ ₋ and without feeling threatened in the process.„ It’s as if they’re putting up with the worst. … The idea is pretty easy to understand, but when large-scale real estate becomes a reality as new businesses and new government agencies emerge, … and it’s just as easy for a successful American to find and grow money with a company that operates in such large and often demanding conditions as to have no hope of returning the favor.\… the problem with a business that runs out of money, and the problem starts to get worse before it even has a chance of growing as the costs climb.\ῂ and with the big banks being driven out of the business, many smaller businesses can no longer operate as they used to.… With the financial turmoil at the federal level, large lenders are forced to sell their mortgages and other liabilities to other large businesses to prop up their bottom line, especially if the company is the world’s fastest growing financial system.… ₎ ₤ ₥ ₫ ₫ and then the problem of debtors turning to their debtors.… and with people at both ends of the debtors’ dilemma getting pushed to borrow from the government to survive, it’s pretty obvious that the big banks are getting the hook on their debt, and the bigger