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Machi4velli
SFN Regular

USA
854 Posts

Posted - 04/13/2009 :  22:02:20   [Permalink]  Show Profile Send Machi4velli a Private Message  Reply with Quote
Why does it matter if people sometimes act irrationally and waste money? The loss of money you could have saved in these situations is precisely the consequence of not being rational. Lose enough and you will probably learn to be more rational in areas that most commonly contribute to your losses, even though you will never be completely rational in every way. If you don't adapt, you may do great harm to yourself. The people of which we are speaking are adults, and they can be prudent if they choose, and I have no problem at all if people who are prudent receive more benefits then those who are not because everyone is equally capable.

Governments in such an economy can still get rid of people who are simply stealing from people (a la Bernie Madoff). What does ultra-rational even mean? Is that a bad thing? Not sure I've ever heard rationality called a bad thing.

Dollar bills are rational, not every place accepts checks or credit/debit cards. Giving cash to someone is more convenient than writing a check or sending it electronically. Paying for convenience (or choosing not to receive bonuses in exchange for convenience in this case) is not necessarily irrational. So what if some people choose not to take advantage of programs offered by banks and credit card companies that would save them money. That is entirely a choice they can make.

"Truth does not change because it is, or is not, believed by a majority of the people."
-Giordano Bruno

"The greatest enemy of knowledge is not ignorance, but the illusion of knowledge."
-Stephen Hawking

"Seeking what is true is not seeking what is desirable"
-Albert Camus
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Dave W.
Info Junkie

USA
26009 Posts

Posted - 04/13/2009 :  23:21:49   [Permalink]  Show Profile  Visit Dave W.'s Homepage Send Dave W. a Private Message  Reply with Quote
Originally posted by Machi4velli

Why does it matter if people sometimes act irrationally and waste money?
The point is that people act irrationally with regard to money most of the time, not just occassionally. An economic system which assumes that people will act with any sort of "enlightened self-interest" is doomed to failure.
Governments in such an economy can still get rid of people who are simply stealing from people (a la Bernie Madoff). What does ultra-rational even mean? Is that a bad thing? Not sure I've ever heard rationality called a bad thing.
People who are rational, economically, nearly 100% of the time will, after examining the way most human beings function, realize that is it in their best interest to take advantage of short-sighted irrationality as often and as much as the law allows. I'm not talking about fraud, I'm talking about people entering into voluntary and legal mutual agreements wherein people's natural irrationality is fodder for a fatter wallet. The "mutual voluntary agreements" thing glosses over the fact that such agreements are often only approximately equitable when both parties are acting with equal amounts of knowledge and rationality, which is rarely the case (most people are not economists).
Dollar bills are rational, not every place accepts checks or credit/debit cards.
I'm talking about regular day-to-day spending. It is difficult to find places which won't accept credit cards anymore. I go to some places which are out "in the sticks," and still find credit cards accepted at all gas stations and fast-food joints, not to mention the major retail stores.
Giving cash to someone is more convenient than writing a check or sending it electronically.
If you ignore the labor required to obtain the cash, you might be correct. I have to go out of my way to get cash, and the only place I regularly use cash anymore is in the snack machines at work.

At gas stations, it's quite a bit more inconvenient to pay with cash, except maybe in New Jersey, where self-service is actually illegal.
Paying for convenience (or choosing not to receive bonuses in exchange for convenience in this case) is not necessarily irrational.
No, it's mostly irrational, and if everyone rationally realized that, then it would be completely irrational.
So what if some people choose not to take advantage of programs offered by banks and credit card companies that would save them money. That is entirely a choice they can make.
Again: you say, "some," my point addressed "most." The problem with economic systems which expect people to act rationally is not that people are sometimes imperfect, it's that they are mostly flawed - that rationality is the exception, not the norm.

- Dave W. (Private Msg, EMail)
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Why not question something for a change?
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Gorgo
SFN Die Hard

USA
5310 Posts

Posted - 04/14/2009 :  01:42:09   [Permalink]  Show Profile Send Gorgo a Private Message  Reply with Quote
ut his argument is that government intervention makes a bad situation worse for everyone.


Yet, the first thing the "Chicago Boys" did was use the state to impose the free market.

Friedman knew his policies would induce short-term poverty. Granted, he (or so he says) thought that would create long-term wealth, but he knew it would induce short-term poverty. What do poor people have to bargain with in a state that shows that it doesn't care about the poor at all, in a state that gives away everything the poor have to the already wealthy?

If he had been honest about wanting freedom, he would have first recommended removing the guns from the police and the military. He would have said that people should reject private property. He would have said that people should ignore debts, ignore the authority of the church and the previous state.

No. Friedman's capitalism exists due to a repressive state. You only begin to end extreme poverty when the people are able to resist the repressive state, and have some sort of control over it, not when the power of the state is increased, as his students advocated.

I know the rent is in arrears
The dog has not been fed in years
It's even worse than it appears
But it's alright-
Jerry Garcia
Robert Hunter



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Machi4velli
SFN Regular

USA
854 Posts

Posted - 04/14/2009 :  22:34:51   [Permalink]  Show Profile Send Machi4velli a Private Message  Reply with Quote
Originally posted by Gorgo

ut his argument is that government intervention makes a bad situation worse for everyone.


Yet, the first thing the "Chicago Boys" did was use the state to impose the free market.

Friedman knew his policies would induce short-term poverty. Granted, he (or so he says) thought that would create long-term wealth, but he knew it would induce short-term poverty. What do poor people have to bargain with in a state that shows that it doesn't care about the poor at all, in a state that gives away everything the poor have to the already wealthy?

If he had been honest about wanting freedom, he would have first recommended removing the guns from the police and the military. He would have said that people should reject private property. He would have said that people should ignore debts, ignore the authority of the church and the previous state.


The "Chicago Boys" are not Friedman, but his economic ideology was based on a stable state, and in the context of a state with protected individual rights, which Chile, etc, did not have. The increased governmental power that came in some of those nations were not at all part of Friedman's ideology, which really only advocated strong government in controlling the money supply in order to maintain price stability. It is easy to criticize an economic ideology if those implementing it only use some parts and neglect other integral parts.

Friedman didn't think the poor needed to bargain with the government, that the government leaving them alone (which they didn't do...) would allow them to improve long-term. I can agree his strategy of transitioning into his ideal economic system from something built upon something entirely different may not have been good, but we do have to remember he did not make any of the decisions on how to do that.

By taking the weapons of the military and police, you would (possibly) reduce their ability to repress citizens, but also reduce their ability to do the right things, like stop actual criminals and prevent incursions. Do you mean people should have rejected private property in those particular states due to the remnants of the previous state or people should reject private property in any state? I have no problem with the former in theory, but I am certainly not convinced allowing the Pinochet government to redistribute it would be any better than leaving property intact.

Chile is not in particularly bad shape 30 years later. Pinochet relinquished power. Its economy has highly outperformed the average South American economy since around 1987-88 (coinciding with the transition to democracy), and the margin of outperformance has almost continuously grown ever since. The Gini coefficient, which measures inequality, in Chile is one of the lowest in South America. It still maintains many of the market policies (and it is ranked as one of the most "free" economies by the Heritage Foundation, which favors this type of government).

"Truth does not change because it is, or is not, believed by a majority of the people."
-Giordano Bruno

"The greatest enemy of knowledge is not ignorance, but the illusion of knowledge."
-Stephen Hawking

"Seeking what is true is not seeking what is desirable"
-Albert Camus
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Machi4velli
SFN Regular

USA
854 Posts

Posted - 04/14/2009 :  23:14:52   [Permalink]  Show Profile Send Machi4velli a Private Message  Reply with Quote
Originally posted by Dave W.
The point is that people act irrationally with regard to money most of the time, not just occassionally. An economic system which assumes that people will act with any sort of "enlightened self-interest" is doomed to failure.


Not sure either of us can prove to the other's liking the proportion of times in which people are irrational. I am not sure the economic system requires everyone to act with enlightened self-interest, it just implies it is the best strategy, and that people should try to approximate that strategy, even if they don't do it completely. This in no way homogenizes the strategy everyone should be taking because people have different abilities, needs and wants, tolerances for risk, preferences, and other unique personal characteristics.

Governments in such an economy can still get rid of people who are simply stealing from people (a la Bernie Madoff). What does ultra-rational even mean? Is that a bad thing? Not sure I've ever heard rationality called a bad thing.


People who are rational, economically, nearly 100% of the time will, after examining the way most human beings function, realize that is it in their best interest to take advantage of short-sighted irrationality as often and as much as the law allows. I'm not talking about fraud, I'm talking about people entering into voluntary and legal mutual agreements wherein people's natural irrationality is fodder for a fatter wallet. The "mutual voluntary agreements" thing glosses over the fact that such agreements are often only approximately equitable when both parties are acting with equal amounts of knowledge and rationality, which is rarely the case (most people are not economists).


People can overcome irrationality or choose not to participate in things they do not understand well, so I don't really care.

Dollar bills are rational, not every place accepts checks or credit/debit cards.
I'm talking about regular day-to-day spending. It is difficult to find places which won't accept credit cards anymore. I go to some places which are out "in the sticks," and still find credit cards accepted at all gas stations and fast-food joints, not to mention the major retail stores.
Giving cash to someone is more convenient than writing a check or sending it electronically.
If you ignore the labor required to obtain the cash, you might be correct. I have to go out of my way to get cash, and the only place I regularly use cash anymore is in the snack machines at work.

At gas stations, it's quite a bit more inconvenient to pay with cash, except maybe in New Jersey, where self-service is actually illegal.


There is an ATM on every corner here, so going through it once a week takes about 2 minutes (and I even save a little time paying cash for food, so I may actually save time overall). The loss of interest from not having the cash in the bank is tiny because it's only a week's worth of cash (mostly just for food because I do use a credit or debit card for anything big). Having cash in no way prevents you from also having credit cards, so the gas station argument is irrelevant.

Paying for convenience (or choosing not to receive bonuses in exchange for convenience in this case) is not necessarily irrational.
No, it's mostly irrational, and if everyone rationally realized that, then it would be completely irrational.


Maximizing possessions is not necessarily the only objective of a person, so acting in ways that do not promote that objective are not necessarily irrational. Some people hate mowing the grass, so they hire people to do it for them. Some people don't mind (or even like it) and do it themselves. Neither person is being irrational: incentive structures vary from person to person.

So what if some people choose not to take advantage of programs offered by banks and credit card companies that would save them money. That is entirely a choice they can make.
Again: you say, "some," my point addressed "most." The problem with economic systems which expect people to act rationally is not that people are sometimes imperfect, it's that they are mostly flawed - that rationality is the exception, not the norm.


I don't expect people to be rational all the time, but I think everyone has the ability to be rational. Again, the some/most distinction is difficult to prove either way, but the ability of all people to be rational is good enough for me.

"Truth does not change because it is, or is not, believed by a majority of the people."
-Giordano Bruno

"The greatest enemy of knowledge is not ignorance, but the illusion of knowledge."
-Stephen Hawking

"Seeking what is true is not seeking what is desirable"
-Albert Camus
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Gorgo
SFN Die Hard

USA
5310 Posts

Posted - 04/15/2009 :  01:29:06   [Permalink]  Show Profile Send Gorgo a Private Message  Reply with Quote
More on the miracle of Chile

I know the rent is in arrears
The dog has not been fed in years
It's even worse than it appears
But it's alright-
Jerry Garcia
Robert Hunter



Edited by - Gorgo on 04/15/2009 03:03:43
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Gorgo
SFN Die Hard

USA
5310 Posts

Posted - 04/15/2009 :  03:14:16   [Permalink]  Show Profile Send Gorgo a Private Message  Reply with Quote


Friedman didn't think the poor needed to bargain with the government, that the government leaving them alone (which they didn't do...) would allow them to improve long-term. I can agree his strategy of transitioning into his ideal economic system from something built upon something entirely different may not have been good, but we do have to remember he did not make any of the decisions on how to do that.

By taking the weapons of the military and police, you would (possibly) reduce their ability to repress citizens, but also reduce their ability to do the right things, like stop actual criminals and prevent incursions. Do you mean people should have rejected private property in those particular states due to the remnants of the previous state or people should reject private property in any state? I have no problem with the former in theory, but I am certainly not convinced allowing the Pinochet government to redistribute it would be any better than leaving property intact.



Just to clarify. Friedman was involved to a small degree in some of these places, but not as much as people with similar ideas like Jeffrey Sachs. I don't think he can be completely given credit or blame, but if we give him credit, I think it's disengenuous not to give him some of the blame. These places became a mess because of his students, and because of people with similar ideas, some of whom were influenced by him.

Also, I didn't say anything about the poor bargaining with the government. The ideas that people like this promote is that free people bargain freely with each other in the free market. What these people who promote these ideas usually do is remove the government that supports the poor, but not the government that supports the wealthy. They don't outlaw wealth and private property and corporations, they outlaw the minimum wage and social security, etc., etc.


I know the rent is in arrears
The dog has not been fed in years
It's even worse than it appears
But it's alright-
Jerry Garcia
Robert Hunter



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Machi4velli
SFN Regular

USA
854 Posts

Posted - 04/15/2009 :  10:04:51   [Permalink]  Show Profile Send Machi4velli a Private Message  Reply with Quote
Originally posted by Gorgo

More on the miracle of Chile



Some deviations from Friedman's ideology have helped (I am defending capitalism and arguing Friedman did not intend to keep poor people poor, but I agree that Friedman's ideology is not perfect and I don't entirely agree with all of it). However, the deviation has not been drastic, as Chile still has one of the most capitalist economies in the world. The numbers Palast uses are mostly from the 80s, and they have improved considerably since then, with the return of democracy among other things. They are now (newest numbers available anyway) at 13.7% below the poverty line and 7% unemployment.

"Truth does not change because it is, or is not, believed by a majority of the people."
-Giordano Bruno

"The greatest enemy of knowledge is not ignorance, but the illusion of knowledge."
-Stephen Hawking

"Seeking what is true is not seeking what is desirable"
-Albert Camus
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Machi4velli
SFN Regular

USA
854 Posts

Posted - 04/15/2009 :  10:09:28   [Permalink]  Show Profile Send Machi4velli a Private Message  Reply with Quote
Originally posted by Gorgo



Friedman didn't think the poor needed to bargain with the government, that the government leaving them alone (which they didn't do...) would allow them to improve long-term. I can agree his strategy of transitioning into his ideal economic system from something built upon something entirely different may not have been good, but we do have to remember he did not make any of the decisions on how to do that.

By taking the weapons of the military and police, you would (possibly) reduce their ability to repress citizens, but also reduce their ability to do the right things, like stop actual criminals and prevent incursions. Do you mean people should have rejected private property in those particular states due to the remnants of the previous state or people should reject private property in any state? I have no problem with the former in theory, but I am certainly not convinced allowing the Pinochet government to redistribute it would be any better than leaving property intact.



Just to clarify. Friedman was involved to a small degree in some of these places, but not as much as people with similar ideas like Jeffrey Sachs. I don't think he can be completely given credit or blame, but if we give him credit, I think it's disengenuous not to give him some of the blame. These places became a mess because of his students, and because of people with similar ideas, some of whom were influenced by him.

Also, I didn't say anything about the poor bargaining with the government. The ideas that people like this promote is that free people bargain freely with each other in the free market. What these people who promote these ideas usually do is remove the government that supports the poor, but not the government that supports the wealthy. They don't outlaw wealth and private property and corporations, they outlaw the minimum wage and social security, etc., etc.


I think you did, haha, but that's not important. Do you mean they should outlaw private property, corporations, and wealth in general or only in places where they are implementing the free economic policies anew?

"Truth does not change because it is, or is not, believed by a majority of the people."
-Giordano Bruno

"The greatest enemy of knowledge is not ignorance, but the illusion of knowledge."
-Stephen Hawking

"Seeking what is true is not seeking what is desirable"
-Albert Camus
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Gorgo
SFN Die Hard

USA
5310 Posts

Posted - 04/15/2009 :  10:26:34   [Permalink]  Show Profile Send Gorgo a Private Message  Reply with Quote

I think you did, haha, but that's not important. Do you mean they should outlaw private property, corporations, and wealth in general or only in places where they are implementing the free economic policies anew?


I did not say they should. I said that "free marketeers" want to get government out of the way, but they want to start eliminating programs for the poor, not programs for the wealthy. You don't need to eliminate the laws supporting a minimum wage until the capitalist utopia has been achieved, and you don't need them anymore.

I know the rent is in arrears
The dog has not been fed in years
It's even worse than it appears
But it's alright-
Jerry Garcia
Robert Hunter



Edited by - Gorgo on 04/15/2009 11:07:13
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Dave W.
Info Junkie

USA
26009 Posts

Posted - 04/15/2009 :  13:17:18   [Permalink]  Show Profile  Visit Dave W.'s Homepage Send Dave W. a Private Message  Reply with Quote
Originally posted by Machi4velli

Not sure either of us can prove to the other's liking the proportion of times in which people are irrational. I am not sure the economic system requires everyone to act with enlightened self-interest, it just implies it is the best strategy, and that people should try to approximate that strategy, even if they don't do it completely. This in no way homogenizes the strategy everyone should be taking because people have different abilities, needs and wants, tolerances for risk, preferences, and other unique personal characteristics.
I was under the impression that the invisible hand which obviates the need for governmental regulation is created by a quite-large majority of consumers using their enlightened self-interest to choose rationally among cometing suppliers of goods and services. If consumers do not act in that way most of the time, then ignorance, laziness and unenlightened selfishness will drive the market, creating not so much a "free" market, but a "yeah, whatever" market. Well-informed consumers making educated choices is the premise for a free market from which all benefit proportional to their means.
People can overcome irrationality or choose not to participate in things they do not understand well, so I don't really care.
Are you suggesting that people can choose either to become educated consumers or to quit going to the grocery store?
There is an ATM on every corner here, so going through it once a week takes about 2 minutes (and I even save a little time paying cash for food, so I may actually save time overall). The loss of interest from not having the cash in the bank is tiny because it's only a week's worth of cash (mostly just for food because I do use a credit or debit card for anything big). Having cash in no way prevents you from also having credit cards, so the gas station argument is irrelevant.
My argument was that rational spenders should no longer be using cash except where it's absolutely necessary, and if fewer people has cash, then the places that accept only cash would also vanish.

Plus, nobody pays a credit card off every week, so your money sits in the bank longer. If a person gets 1% interest from the bank, and uses a 1% rebate credit card, and spends (on average) $100 a week at the grocery store, then his average daily balance will be $202 higher than a person withdrawing $100 cash every week, so that means $2.02 more interest every month, and thanks to the wonders of compound interest, $24.36 more after a year. Thinking that's "tiny" is precisely the problem of thinking of money in terms of percentages instead of absolute buying power.

And, if this same person takes a conservative extra 30 seconds to pay with credit card, then (on average) if he values his spare time only at minimum wage, then he's "spending" 5.46 cents per use by using the credit card, compared to the 25.3 cents per week he's saving by using it. This compared to the two minutes at the ATM, which cost 21.8 cents at minimum wage (each time!).

Once we account for the value of time (using the minimum wage figure), with our hypothetical person going to the store twice a week, buying $100 of stuff per week, with 1% interest and a 1% credit card, compared to a person spending two minutes at the ATM once a week, spending the same and with the same 1% interest from the bank, we see a net savings after turning the crank of about $29.58 per year for the credit card over cash.

This hypothetical non-credit-card user is paying nearly $30 a year for the "convenience" of wasting his own spare time. The fee only goes up with the amount of purchases made per week, too. It's well over $50 if he spends $200/week.

That's just one example. I've got a gas card that gives me 5% rebates, and is definitely a lot faster than going into the building to pay. I drive a lot, so I'd estimate it's saving me over $80/year total in time, cost and interest over what I'd be spending if I were paying cash for gasoline. It doesn't make sense to spend that money on nothing more than staying longer at the gas station.

And yes, nothing precludes a person from having cash and credit cards. But using the cash costs a person money when the credit cards actually make the net purchase price cheaper. And long gone are the days of cash-or-credit pricing at the gas pump.
Maximizing possessions is not necessarily the only objective of a person, so acting in ways that do not promote that objective are not necessarily irrational. Some people hate mowing the grass, so they hire people to do it for them. Some people don't mind (or even like it) and do it themselves. Neither person is being irrational: incentive structures vary from person to person.
But the rational incentive for all is to minimize the spending that they are forced to make in order to maximize their economic power for the goods and services they can choose to buy (like for hobbies and recreation). The money I save on gasoline is more than enough to pay for my personal Website. The money my family saves on groceries is more than enough to pay for a kid to come mow my lawn so I don't have to. We have to spend money on groceries and gasoline, but we can do it in a way that minimizes the amount we're forced to spend, and so maximizes what we have later, and thus our freedom to do what we want.
...the ability of all people to be rational is good enough for me.
I don't think that's good enough to maintain an economic system which is predicated on people acting rationally.

- Dave W. (Private Msg, EMail)
Evidently, I rock!
Why not question something for a change?
Visit Dave's Psoriasis Info, too.
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Machi4velli
SFN Regular

USA
854 Posts

Posted - 04/15/2009 :  19:04:19   [Permalink]  Show Profile Send Machi4velli a Private Message  Reply with Quote
Originally posted by Gorgo


I think you did, haha, but that's not important. Do you mean they should outlaw private property, corporations, and wealth in general or only in places where they are implementing the free economic policies anew?


I did not say they should. I said that "free marketeers" want to get government out of the way, but they want to start eliminating programs for the poor, not programs for the wealthy. You don't need to eliminate the laws supporting a minimum wage until the capitalist utopia has been achieved, and you don't need them anymore.


Depends on what programs you mean for the wealthy, but I have no problem with that in some manner. I don't think private property is a program for the wealthy or that we can really do without it, but I agree that the wealthy may have gotten property in ways that are unfair (inequality itself is not unfair to me, but property has been gained unfairly by some who are wealthy).

"Truth does not change because it is, or is not, believed by a majority of the people."
-Giordano Bruno

"The greatest enemy of knowledge is not ignorance, but the illusion of knowledge."
-Stephen Hawking

"Seeking what is true is not seeking what is desirable"
-Albert Camus
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Machi4velli
SFN Regular

USA
854 Posts

Posted - 04/15/2009 :  19:38:16   [Permalink]  Show Profile Send Machi4velli a Private Message  Reply with Quote
Originally posted by Dave W.I was under the impression that the invisible hand which obviates the need for governmental regulation is created by a quite-large majority of consumers using their enlightened self-interest to choose rationally among cometing suppliers of goods and services. If consumers do not act in that way most of the time, then ignorance, laziness and unenlightened selfishness will drive the market, creating not so much a "free" market, but a "yeah, whatever" market. Well-informed consumers making educated choices is the premise for a free market from which all benefit proportional to their means.


"Invisible hand" is so overused! It's an obscure quote found one time in the depths of the 1000+ pages of Wealth of Nations! (Not important, just an annoyance.) It does not require perfect rationality by every consumer to work, just a general move in that direction. Even if "most" actions are irrational, the way in which the irrationality manifests itself will be much less homogenous than that which is rational, so a majority of rationality may not even be necessary.

For example, suppose the Ford Taurus is the best car in its class (I assure you it is NOT, but follow me, haha). Even if it only has a market share of 30% in its class, that may be the greatest single share. The Camry, Cavalier, E 320 (or whatever), Car D, Car E, Car F, and Car G may each have 10% of the market. The Taurus is still the general trend in the market. Likewise, 30% rational choices may reflect the actual trend because the other 70% may likely be much more fragmented.

If rationality would drop to 5%, maybe none of it would work (and certain industries may very well have too much misunderstanding to work). I don't agree people should or will benefit proportional to their means. It depends on the amount of risk you are willing to take, differences in individual effort and ability levels, the rarity and demand for your skill-set, etc. But, holding all of those things constant, I agree people should benefit proportional to their means.

Are you suggesting that people can choose either to become educated consumers or to quit going to the grocery store?


No, only that people costing themselves money by making irrational choices is acceptable.

My argument was that rational spenders should no longer be using cash except where it's absolutely necessary, and if fewer people has cash, then the places that accept only cash would also vanish.

Plus, nobody pays a credit card off every week, so your money sits in the bank longer. If a person gets 1% interest from the bank, and uses a 1% rebate credit card, and spends (on average) $100 a week at the grocery store, then his average daily balance will be $202 higher than a person withdrawing $100 cash every week, so that means $2.02 more interest every month, and thanks to the wonders of compound interest, $24.36 more after a year. Thinking that's "tiny" is precisely the problem of thinking of money in terms of percentages instead of absolute buying power.


If the time I am saving is unproductive time (i.e. I wouldn't make any money in it anyway), then it's all trivial, all of my time isn't necessarily worth any type of benefit (financial or personal). It would take an extra 30 seconds to pay with a credit card each time. I buy lunch 5 times a week, so that's a net savings of 30 seconds. That's most of what I buy with cash, so it's like $20-40 per week at most, plus I always have the option to pay cash for random things that may come up (some kid selling a baked goods to support his little league team or whatever random things come up). I also occasionally go through toll booths and it costs a monthly fee to get automatic charging here, which is not worth it for me because I only go through occasionally. I agree carrying around $200 all the time may not be rational, but I don't care to pay the interest I lose on $20-40 a week to have the convenience of paying with cash, and I think I do get a net savings of time from it.

It is not necessary to think of it as a percentage to come to that same conclusion. I would not mind paying an extra $25 onto a $10 fee or a $5,000 fee if it buys me a year of convenience. When considering convenience, it is perfectly acceptable to break it down into small chunks assuming I break down the time/effort savings down into small chunks as well.

But the rational incentive for all is to minimize the spending that they are forced to make in order to maximize their economic power for the goods and services they can choose to buy (like for hobbies and recreation). The money I save on gasoline is more than enough to pay for my personal Website. The money my family saves on groceries is more than enough to pay for a kid to come mow my lawn so I don't have to. We have to spend money on groceries and gasoline, but we can do it in a way that minimizes the amount we're forced to spend, and so maximizes what we have later, and thus our freedom to do what we want.


I don't disagree. There is a matter of quality and preference in some of those things, like groceries, so rationality is not defined by buying all Ramen because it's the cheapest food, but generally, I have no problem with your point there.

"Truth does not change because it is, or is not, believed by a majority of the people."
-Giordano Bruno

"The greatest enemy of knowledge is not ignorance, but the illusion of knowledge."
-Stephen Hawking

"Seeking what is true is not seeking what is desirable"
-Albert Camus
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