Working for local government, I often have to get three quotes and then select the lowest price. However, the rules allow me to select a higher cost if I believe we would get higher value or have reasons to believe the lower cost is unrealistic.
This is what economists call the “rational actor”. A buyer who would act in his own self interest.
I’ve had to rethink the rational actor. Too often, people act irrationally when they purchase. It’s more of a justified actor. Buyers come up with rationalizations to justify buying what the don’t need or is bad for them.
I have also rethought competitive advantage. That is definitely a race to the bottom. It is idealistic to believe everyone can go to college. The simple fact is that in any population, there is an IQ bell curve. There is a large chunk of people who need the type of jobs that often get outsourced abroad. While there is competitive advantage in lowering labor costs, it unemploys a large chunk of your customer base. In the meantime, they are struggling to compete for fewer and fewer of the jobs they can do.
In short, I think there are some economic assumptions that need revisiting.
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Yes, acadmeics talk of rational, but really people are easily duped, driven by fear and greed... economics serves the 1% nearly all the time. peace and gl
I think economics merely tries to explain. Economists, on the other hand, can often get the explanation wrong, leading to bad policies. The reality is that we can only explain after the fact. The system is too complex and chaotic to truly know how a tweak here will ultimately affect the market there. And once an error is made, rather than put things back, new changes are added to compound the problem with new imbalances. We’re just monkeys with sticks poking at a system with millions of variables.
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