An interesting discussion cropped up the other day concerning Economics. One of the fundamental rules in economics that (most) goods have an inverse price-quantity relationship of demand. In other words, if the price is lower, you demand more because it is cheaper.

If you drew a graph of quantity on the x-axis and price on the y-axis, you would therefore get a downward sloping curve.

However, how can we justify why it slopes downward?

One of the theories used to explain it is marginal utility theory. Utility is a fancy economics term for “satisfaction gained from consumption”. Marginal utility theory is associated with how much satisfaction you gain from consuming one more of the good. In general, your utility will decrease. For example, if you eat a chocolate bar, it tastes great and you are very satisfied. However the more chocolate bars you eat, the less amount of satisfaction you gain from eating the next bar of chocolate.

One of the assumptions to allow marginal utility theory to justify why the price-quantity demanded relationship is negative is that we make rational decisions.

The challenge comes when you try to identify when we don’t make rational decisions. Go on, have a go. However there is a catch: making rational decisions does not imply we have perfect knowledge of the situation. In simpler words, it doesn’t matter if we do not have all the facts or the understand completely the mechanics behind a situation – rational decision making is based on what we perceive.

Here’s one attempt to identify an irrational situation: laziness. Suppose you can get a coffee here which costs $2, or a coffee that tastes better, and is cheaper that costs $1. However, the one that costs $1 is a 10 minute walk away. The rational person would pick the $1 coffee, however, some might argue that if we are lazy, we will just take the $2 coffee: hence an irrational decision. This is obviously flawed, as any economist would state that the cost of walking 10 minutes away outweighs the extra utility you would gain from paying half the price, hence the net utility gained would maximised in buying the $2 coffee. Therefore still a rational decision.

Another attempt was an interesting one: love. Let’s consider lust before considering love. Lust is easily disproved: we gain satisfaction from the attraction. Now let’s look at love. Love by my definition is “wanting the best for another despite any sacrifice“. The economic man would not give up 5 minutes of labour to please his wife – where is the rationality in self-sacrifice? Try to compare the actions of love to the satisfaction gained from self-sacrifice when performing charity. This is simply a different “form” of utility, but still utility nonetheless from making the decision we believe is right, best, bound to and is your duty. Therefore decisions made in love are still rational.

The final attempt was that of drugs. However the flaw is that drugs allow decisions to be made subconsciously, or without full consciousness. This means that decisions are therefore involuntary and not part of us. To an outsider, yes, this will be an irrational decision. However internally it remains rational.

The thing is to realise that there is a difference between externally-realised rationality and internally-realised rationality. It seems that internally-realised rationality is always rational. There is no irrationality internally. We always, without exception, make a decision because we believe it is the right and best decision to make at the point of time. Even if you pursuade yourself to make a “bad” decision, the persuasion in itself will act as a justification to your new “worse” decision actually being “better”. (Try read that again if it was confusing) It seems that this is the only unified aim between everybody.

Let’s consider this other form of utility that love (not to be confused with lust) introduces. What makes this “form” of utility interesting is that to an economic system, this utility would be considered irrational. As humans, there is no arguing that this utility plays a very significant role in our lives, if not the majority of roles. This poses an interesting question: why, then, have we created a system with such massive influence on many of our lives that chooses to disregard this form of utility? The quick-witted debator would immediately retort with the concept of legislations, ethical regulations, and other similar restrictions. However there is no doubt that we know little about these two forms of utility – and such systems were obviously made by following the “easy” rather than the “right”. This branches off nicely into the grey areas of morality – something I shall save for another day.

What makes the situation nicely contradicting is an interesting experiment done around the 1970s. A man was put into a room with his head connected up to brain wave measuring instruments. He was then told that he would press a button on a table in front of him whenever he wanted. The results of the experiment, quite predictably, were that about a split second (1/10th of a second approximately) before he moved his hand to hit the button, the brain neurons were fired up.

The experiment was then changed so that the man could report as to when exactly he was actually aware that he was about to make the decision to hit the button. The results were direct, conclusive, and of course: highly controversial. What happened was that the brain neurons had fired up before the man was conciously or even subconciously aware that he was going to make a decision. In fact, the actual timeline of events was: time 0: brain neurons fire up, time 0.1: man is subconsciously aware that he has made a decision, time 0.12: man makes decision and begins to move his hand.

The experiment was repeated with slight variations all with the same conclusion: a decision is made before we are even slightly aware of it. This, of course, was thrown quite rudely in the faces of believers of free will – all who predictably reacted with anger and disbelief.

The professor who carried out the experiment was too insulted by the results of the experiment and was afraid of the religious implications of his discovery. He has recently been building up a case against his results – suggesting that in the 0.02 seconds before the awareness and the action, you have the chance to rebuke the decision and thus go against it. Of course, there is the issue that the brain neurons have to fire up a good 0.1 seconds before that rebuking.

Getting back on subject, this suggests that all decisions are in fact irrational – as rationality suggests a conscious entity to make a decision. The effects of any situation are not determined by how much satisfaction we expect to gleam from a decision, but simply from the natural consequences of previous conditions.

Allow me to use an analogy to explain this. Gravity is a physical and naturally occuring phenomenon. It exists and functions unquestionably as a feature of life. It also provides a condition for any object – it creates a force that pulls a mass from infinity to a point. The object will always experience this force and can therefore act in a predictable manner.

However, gravity is not the only condition acting on the object, there are many others: air resistance, wind, friction, surface area – and even the mass itself of the object. All of these variables determine the outcome of how the object will react to gravity. Each – to use an economics term – ceteris paribus will have predictable outcomes, but the mechanics behind the situation are so complex that we are currently unable to account for all of them – and hence decide what company we should buy shares in next week.

Then, you argue, “then why is there variance in our decision making? What is the root cause that would start off all the deviations in conditions around the universe?”. Like gravity – questioning what began the existence of it is non-beneficial: it gets us nowhere – however understanding and appreciating its existence is what is useful.

Drifting slightly off economics, this brings up to the concept of the mind and free will. The question remains that if our decisions cannot be controlled – what is the purpose? The idea that decision are made before we realise it as a result of past conditions does not mean that decisions are not made. What it does do is provde the concept that the mind is simply yet another naturally occuring phenonenom that reacts in such a way to conditions. There are decisions, but no decision-making entity. There is a mind, but no “self”. We are not in control – so to speak.

Ignoring the dramatic last sentence, let me give another analogy. Imagine a puppy. Even if you house and feed the puppy, you do not “own” the puppy. You cannot control what the puppy is going to do. You can predict what the puppy will be likely to do, you can understand why the puppy reacts in certain ways, but not control. However, what you can do is train the puppy. You can train the puppy to react in a certain ways to certain conditions.

Let’s say you put a rock on a top of a hill filled with gravel – it rolls down a path. If you put it on that exact spot again, it will again roll down the path. The more you put that rock such that it rolls along the path, it will create a groove along the path, and thus make it more and more likely to follow that very same path.

Similarly, the mind, though a naturally occuring phenonemon, can be trained. It is this understanding that prevents us from a unfufilling struggle to try and control every single thought that occurs throughout our mind. Instead of controlling the thought – simply realise the thought as what it is, and nothing more.

Let’s leave the “everything is irrational” to interpretation.

Meanwhile, let’s return to the subject of utility. I might be going out on an arm and a leg here, but I am willing to suggest that these two forms of utility each have externalities. An externality may be defined as the spillover effects incurred by society due to the consumption of a good – or in this case, a form of utility. They come in two sunny and not so sunny packages: positive and negative externalities – both of which names are pretty self-explanatory.

I propose that utility gained from conditions such as “lust” have negative externalities, and that utility gained from conditions such as “love” have positive externalities. Before continuing, let’s consider the nature behind these two utilities.

The lust-based utility has an interesting characteristic that it stems from “attachment“. The utility is gained from the satisfaction of an attachment, a greed, a craving, whatever you want to call it. Another characteristic is that consumption will also create more “attachment” – an attachment that will ultimately lead to dissatisfaction, or dis-utility, when it can no longer be consumed.

The love-based utility also has an interesting characteristic: it is derived from, and results in contentedness. It is an understanding of interdependency, of duty, of a natural flow and responsibility. Even more interesting is that this corresponds with our definition of “maturity”‘s characteristics. For example, when we are very young, we are completely dependent. Becoming adolescents, we have a phase where we strive to be completely independent. Through experience we soon develop an attitude that most recognise as a sure-sign of maturity – the understanding of interdependence. Perhaps that’s why most old people are like what they are – especially nearing death.

Now that the characteristics are identified, let’s consider the externalities. This, like most of the grey areas of ethics is not something that I can easily persuade through a couple sentences on a blog post. Instead, simple observance and experience is enough to convince anyone that that which is rooted in attachment is actually a cause of dissatisfaction (think long term, where impermanence applies to all situations), whereas that rooted in understanding would cause a lot of morally responsible activities to take place, as well as solving all of the negative reactions one would otherwise experience when a craving is not satisfied.

So what sort of economic system is that which feeds on its own negative externalities? Masochistic and deluded to be sure.

If the implications of the last sentence didn’t hit you hard – here is it rephrased. If we understand and simply see things as a situation and not a provocation, we have eliminated a great deal of suffering. Imagine seeing a rose, but instead of thinking “this is a rose. It smells nice. It looks beautiful. I like how it looks. Who might I give this rose to? Do I have a rose? Is my garden doing well?…etc” we can instead just think “this is a rose”.

This elimination of suffering includes … well, the basic economic problem. Welcome to my wonderful new economic system – one which through the training of people mind’s can eliminate the unlimited needs that people experience, and thus make resource allocation theoretically completely sustainable.

In fact, one huge multinational has been moving towards sustainability throughout the entire lifetime of its business activity. Their statistics don’t lie. With every breakthrough in sustainability – their profits have risen, their costs have fallen, employees are more motivated, and the company vision is increasingly clearly conceptualised in every employee’s minds. Their CEO recently gave a talk on TED explaining this and provides financial proof to persuade others to join in with their movement.

Imagine a world where contentedness is the norm. Where our industries are based to satisfy our needs and wants which are not fueled by craving. A completely sutainable way of living. Somebody once said, remove all the beetles in the world and life would perish within 50 years – remove all the humans in the world and life would flourish within 50 years.

Beautiful image, no?

Completely impractical? Yes.

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