Economics is called the dismal science, but it doesn't have to be. While popular economists these days dabble a lot in psychology, the "old way" of doing economics was much more focused on finding the most rational course of action to solve a particular problem.
Essentially, economic thinking is, at heart, about clarifying priorities and putting a value on how important something is. It might sound cold-blooded: as an example, in an economist's world, "efficiency" is achieved when you can't make anyone better off without making someone else worse off.
In the real world, we sometimes decide that efficiency isn't the whole story -- sometimes, it's actually better to make someone worse off (say, through higher taxes) in order to help someone else be better off.
But this doesn't mean that the approach doesn't have it's merits. By analyzing the costs and benefits of a particular policy or decision, you can actually help yourself to clarify what your priorities really are, and how much they're really worth.
For example, say you want to reduce crime rates (obviously, our day-to-day objectives tend to be more modest than this, but it's a good illustration).
Crime is a weird and interesting subject. It has been found to be affected by seemingly unconnected factors such as weather and lead-based paint, and the options for tackling it are wide ranging and perhaps even overwhelming: building prisons, gun control, addressing poverty, creating jobs, etc. Each comes with its own set of costs, benefits, and what we'll call "non-economic" factors, namely how someone feels about it.
So how do you decide on a policy for reducing crime?
First, weigh up the costs and benefits.
Substance abuse treatment offers us an example.
A recent study on violent crime found that a 10% increase in substance abuse treatment rates (at a cost of about $1.6 billion) could produce savings for local governments and society on the order of $2.5 billion-$4.8 billion.
In other words, expanding substance abuse treatment programs could give us a reduction in crime worth about 56%-200% of the cost to local governments.
Thus, if reducing crime is your objective, you've just been presented with an economically sound option: expand treatment availability through insurance programs or other benefits, and live in a safer society as a result.
It's a cost-benefit analysis that yields a potential answer based on, well, analysis.
Next, compare that cost-benefit analysis to your values
Of course, whether or not you think treatment programs are the right course depends on more than the cost-benefit analysis. Maybe you think substance abuse treatment is a worthy goal in itself, regardless of the costs and benefits, or perhaps you believe that incarcerating drug users is more in keeping with your values.
What is useful about doing the analysis first is that it allows you to compare the costs and benefits of different options, and it helps you to put a value on your beliefs.
To continue the example, what if you're a staunch believer in imprisonment for offenders -- but it doesn't offer the same returns to society as substance abuse treatment? Knowing what those returns are can help you clarify just how much you believe in imprisonment, or just how worth it it is.
Sometimes you'll find that you want to stick to a value no matter what, and other times you'll find that you want to be more pragmatic.
Going back to daily life
The same sort of thinking can be applied to any aspect of your life -- even if the metrics aren't so clear.
For example, say you want to stop watching TV... but you're having a hard time pulling the plug.
Ask yourself, what are the benefits to less TV? Maybe you can save money by cancelling your cable subscription, so that's a metric.
But maybe you're also thinking that you'll have more time to read. You might not be able to put a numerical value on reading, but you can assess how happy it makes you, or how satisfied with life you feel when you read a lot.
On the other hand, what are the costs? You won't know what's happening on Homeland, which is a bummer. And you might have some discomfort at first from the habit change. How big of a deal are those? What will they cost you psychologically?
From there, you can weigh up the question: what's more "worth it?" And how important is this, costs and benefits aside?
The answer might not always be immediately obvious, but it could just be a lot clearer than before.
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