Economics is fun. Believe it! It isn’t the utterly tedious discipline most find it to be in their high school and college classes. In fact, there’s nothing better than slipping in random econ terms into daily conversations and seeing the glassy, puzzled expression in return. We all need to start speaking the same language. In a solemn effort to get there here’s the first suggestion for a conversation piece: diminishing returns.
What does the Swift Economics glossary have to say about diminishing returns?
An amazing term to slip into conversation, diminishing returns is the idea that something can be good for a awhile but eventually doesn’t do it for you anymore.
Chicken BBQ pizza is really good, especially when you’re really hungry. That first slice blows your mind. The second boggles your mind because you’re still pretty hungry. The third piece fills the whole in your stomach completely. The fourth piece kinda hurts to be frank. The happiness (utility) gained from eating chicken BBQ pizza gets less and less with each additional piece consumed. At some point you can’t pay me to eat another piece of chicken BBQ pizza. Especially if it’s stipulated that it must stay in my stomach for a minimum of an hour.
Note: blows your mind > boggles your mind
If you feel like you’re ready to take it to the next level, talk about how your day at work reached diminishing marginal returns around 10:15 am. Then mention the opportunity cost of your lunch selection was very painful; should of gone with the chicken BBQ pizza.
If you need a zinger when gathering around the water cooler look no further: “What is less federal than Federal Express?” “The Federal Reserve (rim shot [cue your co-worker with a pencil and a hard surface])!” The Federal Reserve is not a government entity. It’s no more federal than FedEx.
March Madness has arrived! As you fill out your brackets and put pools together to illegally bet on collegiate athletes, remember to target hyperbolic discounters. They’re everywhere. Feel free to call them an H-D and let them know the pool is contributing to the underground economy. The Swift Economics glossary will explain:
Human tendency to prefer an immediate smaller payoff to a larger, future payoff; a contribution of behavioral economics. “Payoffs” are measured in utility, economic happiness derived from individual preferences which include but are not limited to money, indie rock music, getting high, surfing, and fish tanks. The “hyper” implies that humans discount a payoff more and more the longer they wait to receive it.
Procrastinators, gamblers, drug addicts, credit enthusiasts, and those with low savings rates are all hyperbolic discounters. A person who discounts larger, future payoffs at a higher rate will derive more utility from immediate payoffs; even if the payoffs are a gamble.
Drug addicts discount the consequences of drug abuse at a hyperbolic rate. Huge spenders discount the benefits of saving at a hyperbolic rate.
Self-control issues are a common thread for hyperbolic discounters.
Lastly, when you’re at the gym tell your spotter it’s great increasing your human capital with one another. To make it less awkward feel free to flex and tell them it was the endorphins talking.
Economics as a conversation piece just works. Take these helpful tips and mix some more economics into your life. More practical solutions for your lifestyle to come.