Master the digressions, secure 36 pts in the exam.
Try Digressions
1 to 3 !
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Digression 1
How to deal with scarcity ?
Buddhism points inwards, it focuses on overcoming the wants to make them match the means. It defines freedom as autonomy from the "dictatorship" of desires.
Western Economics points outward, it focuses on increasing the means to fulfil the given wants. It defines freedom as the absence of external constraints.
Useful vocabulary :
Dukkha : misaligned desires and needs.
Four Noble Truth :
Dukkha exists.
It arrises from attachment to desires.
It ceases when attachment to desires ceases.
Attachement to desires ceases with mental discipline (this process is called "Eightfold Path")
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Effective altruism : maximising the good from one’s charitable donations, by thinking in terms of opportunity costs. It allows rational allocation of scarce resources from a utilitarian perspective.
2 examples :
Working oneself in charity
Opportunity cost : Working in a bank, donating to fund a charity salary and still contributing to other causes.
Superstar effects :
Donating 50K for saving a life in an earthquake.
Opportunity cost : The same 50K could save 5 lives through malaria prevention
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Summary
Homo oeconomicus describes how individuals make decisions and is used to predict behavior. It focuses on observable behavior, not motives or psychology.
Revealed-Preference Assumptions:
Preferences are complete (any two alternatives can be compared).
Preferences are stable over time.
Preferences are transitive (if A > B and B > C, then A > C).
Individuals maximize the best available alternative.
These assumptions are challenged by psychologists and behavioral economists. However, this framework still helps explain large-scale phenomena like market behavior.
Egoism is not intrinsic to rationality. It can be added as a simplification or assumption, but Markus Hoffmann argues it is not part of the core definition.
Key Names:
Vilfredo Pareto, John Hicks, Roy Allen, Paul Samuelson
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