EconAir

A basic assumption in economics and business finance is that individuals are rational in the sense that they compare the cost and benefits of a decision. Generally, this means comparing the cost of investing or consuming today to the expected benefits in the future. Cost is usually the price of the product or investment; expected benefits are harder to figure. The rule is simple; if the expected benefits are greater than the cost, buy it. If not, don’t. Even if the cost is spread out into the future – a car paid for with a cash down payment and a car loan – it is relatively easy in theory to discount future costs along with expected benefits back to “present value” (today’s dollars) and do the comparison. One question that economics and finance doesn’t ask is: Does how you make a purchase or investment affect the buying decision? Does it matter if you pay cash or use a credit card? Theoretically, the answer is no. But recent neuroscience research indicates that the answer...

John von Neumann JOHN VON NEUMANN CREATES THE FUTURE If you want to understand the world we live in, you have to know about the thinking of three men – Alan Turing, Claude Shannon and John von Neumann.   I’ve talked a little about Alan Turing in an earlier essay.   All three men knew each other, discussed their ideas with each other and promoted each other’s ideas. John von Neumann has been called the smartest individual of the 20 th Century.   Even an outline of his accomplishments, which you can read about in  Wikipedia, is hard to believe.   He invented game theory, which I discussed in two earlier posts.   He headed up a group of mathematicians who invented new statistical techniques at Los Alamos that made the atomic bomb possible.   In 1944, he wrote a memo that outlined the structure of the modern computer.   He then managed the design and building of a modern general computer and consulted on the building of virtually all ...