Stoicism in Economics — The Ability to Filter Emotion in Situational Economics for Optimal Decision Making
Originally Published: 25/November/2016
From time to time I like to take a step back from the more specific and defined branches of economic thinking, go back to the basics, and reflect on what I was thought within the all-encompassing spheres of “Econ 101” and “Econ 102”. Starting out in economics, it’s understandable for the need of a jumping off point to get a grasp on economics, build a foundation in which to dive deeper into economic understanding and also known the use of economics as an observational tool for the world around us.
This step back gives me breathing room and food for thought on my expanded new insights into economics in which to question and contemplate the basics on which my current economic thoughts were built.
Various questions come to mind like; do I need to re-evaluate the foundation, does my foundation need to be reinforced, and does this foundation need to be re-built from the newly acquired bricks and mortar that I have learned?
The majority of fundamental economics has been centred around the idea that humanity bases its decisions on rational thought. These assumptions, an example being perfect competition in a market place and everything that is entailed in that assumption, are the building blocks to fundamental economic theory and research, like supply and demand curves. Understandably, the student needs these assumptions to make sense of the economic world so they can be strapped in and prepare for lift-off for when they do realise that the economic discipline takes in everything from the ordered field of that beautiful logical language called mathematics, to the frightening and ever changing maze of colourful creativity that is human psychology. With the polarity of mathematics and psychology in mind, how can a balance form between rationality and irrationality on a personal and economic scale?
Recently, the concept of Stoicism has been on my mind, how I have finally been able to put a word to the foundation of my thought process, and the actions that come from it. Being stoic in thoughts and demeanour is not being void of emotion, as that would deny what makes me human, but rather it has given me the tools to filter, organise, and understand my emotions. You could say to a degree, through observation, that Warren Buffet is stoic as he very rarely (if at all) allows the crowd to dictate how he invests. He understands crowd mentality and how emotion can overcome and distort your better judgement.
“Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.” — Warren Buffett
This quote could be repurposed to describe the pure animal spirit and emotional autopilot of people that took them over during the Celtic Tiger period here in Ireland, the boom period of the business cycle around the world when no one cared that economics has a, ‘There’s no such thing as a free lunch’ policy during this time, and the emotional reactionary complacency of the voting public to populist rhetoric.
Coming into exam time in my last year of college as an undergrad, it has allowed me to understand that stress is an externality of emotion and how to minimise it is to spread the workload and study of the semester out over a long period of time. Instead of having a week or two of extremely concentrated stress to deal with before exams, if that concentration of stress was spread evenly over the semester through study bites, attending class, actually listening to the lecturers, and doing the assigned work, then that two weeks of concentrated stress is spread out over twelve weeks.
This process of stoic thinking allows me the balance of being calculated by rationally thinking about scenarios, but also doesn’t trash the emotional side of being human and denying myself the human experience of living. It has opened up an avenue to think about the very basics of economics to the much more defined avenues of economics to the invisible hand of economics in other disciplines and how it affected those disciplines in the past, present, and future.
I don’t wish to force everyone to be stoic practitioners as it may not suit you or you have a personalised and unique way of looking at the word through the economic microscope (for microeconomic study) or telescope (for macroeconomic study), and I would hate for you to lose that perspective you have, but I wish to just highlight the use of stoicism as a way to observe economics as a tool of perspective for understanding the world.
It allows for the understanding of situational economics and to account for variables, from highly predictable sigma 1 to sigma 10 Black Swan outcomes, to realise this is where we stand because of decisions that were made. Our decisions in the here and now will have effects on the future so we must plan carefully and cautiously to allow optimal benefit for the majority of people, but to also cushion those who do not benefit as much to prevent extremely hard landings.
Jonathan McEvoy is an Irish based border control post inspector for the Irish Government and Europe Union who took up his role in 2019 in response to British withdrawal of trade agreements, which was a position taken up after time spent working within the financial services sector in Dubai. He is an economics and finance postgraduate from Waterford Institute of Technology and a community stalwart in his home city of Waterford having been elected to serve on many boards of directors around the city in a voluntary capacity. His love of writing has a deep theme of economics in every published article which talk about history, philosophy, finance, politics, and society. His writings are grounded in practical observations away from the theoretical hypothesis of hypothetical potentials. If you are looking for a modern digestible viewpoint on modern economic ideas with a focus practicality and no holding back, he is a writer for you.
Find Jonathan on the social platforms @jonathanmcev0y
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