Lessons from Economics I

Economics (“natural law of the house”):

οἶκος + Νόμος (oikos - house, nomos - laws/customs/governance)

I used to not recognize the strong connection between Economics and human character but I’ve recently come to understand Economics as a study of natural phenomena and human behavioral patterns.

One simplified way of viewing human interaction and relationships is as a series of game iterations. Below are sound relationship principles that can be applied generally to human relationships. They were drawn from Economic Game Theory strategies proven to be most effective over long-term iterative play.

1. Be courteous: Initiate cooperation and don’t strike first. This keeps the best possible outcome open for all parties.

2. Be extremely responsive: If another party makes a disagreeable move, adjust your tactics immediately.

3. Be forgiving: Don’t punish others excessively. Impose sanctions commensurate with the other party’s infraction and remove these sanctions immediately as soon as the other party resumes cooperation.

4. Don’t envy others: Focus on building the most durable and beautiful economy within your realm of influence, not on another person’s gains.

5. Be clear: Ensure other players can easily interpret your actions through early and explicit communication.

Q*: MR=MC

Profit-maximizing production occurs where marginal revenue equals marginal cost.

Economics to English translation: If the product or service you offer adds value to the world, produce and deliver as much as possible given the compensation you receive in return. This practice maximizes your overall profit.

At the outset, this seems counterintuitive because most people quickly recognize that, as marginal cost approaches marginal revenue, the profit margin for each item decreases (i.e. you get to “keep” less from each additional unit you produce). However, this concept demonstrates mathematically that in pouring out nearly all of what you receive to create additional value, you simultaneously maximize both your own profit and the profit of the world. This general energy and wealth management precept is applicable for the individual and also scales to the firm and even to the global level.

All wealth originates from the miraculous mysteries of the earth’s fertility wherein the Source of Life transforms a seed into a crop (see British economist David Ricardo’s writings). The resources that the earth provides are then transformed and refined through the value-adding labor of humans and other creatures. In apprehending this principle of wealth as a free gift, we grow wealthier individually and the world benefits maximally when we create as much value as possible and offer it to others. Conversely, the laws of the universe indicate that we destroy wealth if we operate under the assumption that it is ours to keep or hoard.

Also of significance: the foundation of these principles collapses if what we produce and sell erodes the health of others and/or enables dysfunction in the world.