Basic Problems with Economics

[Phoebe]

Despite taking many Economics classes I do not understand much of it at all. Chiefly I object to the continual confusion between "people tend to act in their self-interest, as they perceive it" and "people tend to act rationally". They do not do the latter AT ALL, HARDLY EVER, and the DO THE FORMER, SOMEWHAT POORLY. Thus I find myself at odds with any part of this discipline that relies on contrary assumptions. Luckily there's still a lot left, like the people who analyze monetary policy and trade and all sorts of things I wish I knew more about.

The basic problem, however, arises in my personal day-to-day life in this manner: institutions tend to reward the utterly incompetent actors who manage to make friends with the decision-makers, for whatever reason, and punish the competent actors who have no such political savvy or luck. This is why my taxpayer dollar goes to support useless people running around in a damn golf cart - or the equivalent - in so many situations, and why my dollar as a consumer goes less far because of similar processes at work in the private sector. I don't know how you make it stop except to have strict rules about nepotism, but friendship isn't easy to block out that way because it's not the usual sort of nepotism. Friendship is a term I'm using loosely here - flatterers, extortionists, bullies, whatever, these all can count as friends for the purposes of incompetent boobs being allowed to thrive in their roles while the hard workers suffer.

[bralbovsky]

This.

Presently, the closer to the money one is, sales, investment, capital management, the higher one's income is. This has no relation to the actual value one adds to the enterprise. Sure, sales are necessary, but if we look at something mundane, like milk, the farmer gets less than 10 cents a gallon. The processor gets most of it. There are regulatory and other values added by the processor, but their take is so totally our of proportion that they can amass the capital to open a chain of gas stations and grocery stores, while farmers in general languish. Let's not even open the question of who works harder... The processor in my example isn't even particularly afflicted by graft. It's just following the system.
Until we design a way to reward value added, we will be the slaves of the greedy.

[Akiva]

My biggest problem with economics is how few people get that it's a form of morality---the system decides who is worth and who isn't. It isn't really a science because it's prescriptive.