Money can help us place a value on things, but the underlying value of things can be explained by the concept of utility. This podcast explains:

Econs for the iPod – Utility

We are now beginning to consider some of the fundamental assumptions which are central to the ‘science’ of Economics. We should already understand that utility is a key idea, yet also a very vague term when one we consider how subjective this idea is.

Another key assumption of mainstream Economics is that people behave in a rational way. Remember the 6 Principles:

The 6 Core Economic Principles

(thanks to http://www.kidseconposters.com)

Look at principle 3. This assumes rational responses to a given situation.

Yet is this always the case?

The excellent TED Talks website has a number of interesting presentations that argue that we as humans do not always behave rationally. These arguments come from various connected disciplines (or subjects) such as behavioural economics and pyschology. It is worth knowing these more recent theories which seem to contradict the long standing assumption that we behave rationally. Note, if you study Theory of Knowledge, these arguments are really useful for when you study Reason as a Way of Knowing but also the Human Sciences as an area of Knowledge.

Crystal Clear action forward.pngSuggested learning activity, if you are studying as part of a group. Divide yourselves up so that you take one of the following videos each (or as pairs, threes, whatever). Watch your chosen video and prepare a short summary (max 300 words) of the messages which are relevant to your studies of Economics, and be prepared to share your summary with the others in your group.

Note – the title above each video embedded below gives a direct link to the video. From the direct link you could download each video to your iPod / iPhone, for example.

Dan Ariely asks, Are we in control of our own decisions?

Daniel Kahneman: The riddle of experience vs. memory

Dan Ariely on our buggy moral code

Laurie Santos: A monkey economy as irrational as ours

Dan Gilbert on our mistaken expectations