Linking psychology and economics

The ballet dancer stands on her toes in an elegant display of womanhood, but it is not her natural state of existence, nor can she maintain herself in her position for long. The theory of general equilibrium, similarly, is elegant in construction but impracticable in reality. The need to balance economic variables was not born in economics; it is an import from the sometimes artificial (and idealistic) world of mathematics. Take water. If movement (of a river, say) is defined as dynamic, while stagnancy is defined by statism, then a river is in dynamic equilibrium, while the sea is in static equilibrium. The water cycle would be in a dynamic equilibrium. But water does not change when you start to observe it, so it does observe physical/ mathematical rules that are true under all normal conditions. But why would you expect human beings to behave similarly? Water does not have an 'internal motivation', which changes its behaviour based upon an internal stimulus. So its behaviour has only one dimension - its reaction to an external stimulus. Any theory that seeks to explain the behaviour of water will only have to take into account the

This article was originally published on November 03, 2017.