All Posts Tagged “Economics”

5 Economics Lessons You Learn Traveling

Real vs. Nominal Prices

Any trip to the developing world will introduce you to ridiculous nominal prices. I will never forget going out for dinner with friends our first night in Ho Chi Minh City and racking up a bill of 1,000,000 Vietnamese Dong. Traveling out of your country, exchanging money, and interacting with widely different nominal prices is the best way to learn that the amount of zero’s on your paper don’t matter, what matters is the real stuff you can buy with it.

Opportunity Cost

Most long-term travelers are funding their trips with savings. You travel to a new country or continent with a limited amount of money and time, but unlimited options of things to do. At home, with your life running on momentum, it is easy to be unaware of the choices and options that are available to us. When you travel, you are confronted with the reality that what you choose to do today will affect what you can do one month from now. You learn that the cost of any one thing is not just the price, but the other ways you could have spent the money and time.

The Value of The Entrepreneur

The difference between a developed or undeveloped country is a story about entrepreneurs and government regulations. Traveling allows you to see communities that are thriving and communities that are suffering. You get to see first hand that local economies thrive when foreign entrepreneurs can create business and employ locals who may have less skill or training. You also get to see the countries and communities that are suffering because they prevent people from doing business.

Everyone Wins From Trade

For any trade to happen, both parties need to feel they are gaining value. You have to value a burger more than the price to buy it. And the restaurant has to value to money more than the supplies to make it and sell it. When you travel you can see the impact you can have on a business. You can see how eager people are to do business with you. You can experience first hand that buying something cheaply in a different country is not harmful, but massively beneficial.Going to markets in the developing world is one of the best ways to see the win-win nature of trade. People seek you out, eager to make sales, eager to get their product into your hands. The moments where you find something you are eager to buy and a person who is eager to sell it to you, it is stuck in your head that trade is good for both parties.

The Harm of Government Regulation

Traveling quickly from one country to the next is a great way to see how bad laws negatively affect countries.

Crossing a border and seeing the price of goods drop dramatically makes you think “it’s so dumb that it is so expensive to by X in that country.” Experiencing protectionism is a great teacher. Feeling the annoyance about products that you couldn’t find, and the quality of products available at supermarkets across the border is the best way to learn the harm of protectionism. In the same way traveling from Malaysia across the border to Singapore and experiencing the dramatic change in development sparks questions in the traveler’s mind about WHY? How are these two places that are so close and so similar, so different in terms of wealth?

In the same way traveling from Malaysia across the border to Singapore and experiencing the dramatic change in development sparks questions in the traveler’s mind about WHY? How are these two places that are so close and so similar, so different in terms of wealth? You are driven to learn about what makes countries rich and poor.

Schelling Points and Goal Setting

There is a game theory concept called Schelling points that I find very applicable to personal goal setting.

A Schelling Point is a point that is mutually recognizable between two or more people without talking. Picture an X’s and O’s board. All the squares are clear except for one with an X. If you gave this picture to two people sitting separate rooms, and asked them to pick a spot that the person in the other room will pick, odds are they both pick the spot with the X.

This spot is distinct, unique. And it provides a clear distinction from all other options. It is a point that is easy to agree upon.

Points like this are important in negotiations. If you pull out a map of the U.S. or Europe and look at the borders between states and countries you can see that many of the borders are rivers. Rivers are perfect Schelling points. It is just easier to say you get that side of the river, and I get this side than to try and get a border 5 feet to the east of the river.

If I agree to let you have 5 feet on my side of the river what is to prevent you from later coming back and saying that you want an extra 15 feet. I’ve sacrificed the natural divide, and now it is easier to justify taking more land.

Schelling points are important in negotiations, and they are a helpful way to think about setting up your own life, or negotiating with your future self.

For me, writing every day is an important part of my personal development. The main thing I want to do is to spend time writing, but that is a bit abstract. It isn’t concrete. Publishing one post a day is absolutely concrete. It is clear. There is no wiggle room.

Had I decided to write for an hour each day it would be very easy to cut short to 50 minutes one day. Then, maybe a few days later I might only do 45. Maybe one day I would only have time for 30. It’s still writing, and it’s easier to justify.

Writing one hour a day isn’t a great Schelling point, but publishing a post once a day is.

It is very clear. It is either yes or no. There is no half measure. There is no way to let the commitment slip. It is a simple and clear divide between meeting my goal or not.

When setting goals, instead of thinking about what you would choose to have happened in a perfect would, set goals with the clearest distinction between success and failure that is possible.

Cold turkey is often more effective than easing off of a habit because it provides a clear Schelling point. There is an obvious distinction between success and failure. There is no slippery slope. It is either yes or no.

Minimum Burger Price Laws

Almost everyone under the age of thirty is jacked up about the idea of raising the minimum wage to $15/hour. Since this minimum wage idea is so popular, I propose we extend the idea. Instead of just enforcing a minimum price law for labour, why don’t we make one for hamburgers?

What do you think would happen if it was illegal to sell hamburgers for less than $15/burger?

Would there be more or fewer burgers sold in 2017 if, as of Jan. 1, restaurants and fast food chains were not allowed to sell a burger for less than $15?

It’s painfully obvious what would happen. LESS BURGERS would happen.

All those expensive fancy burger places would be okay. There might even be a few more fancy burgers sold since those were the only ones that you could get, but the total amount of burgers would go way down.

Making it illegal to work for less than $15 an hour is no different than making it illegal to sell a burger for less than $15.