Economics Review by Steven Pearlstein with my comments

Washington Post, January 17, 2010 page B6:

Cost,Price, Value. These words are often used interchangeably. We tend to assume that, in competitive markets, the price for purchasing something is roughly aligned with the cost of producing it, plus a modest profit. And because we presume that markets do a pretty effective job at matching supply with demand, or incorporating all that is known about a particular asset, or divining that sweet spot between what people are willing to sell something for and what others are willinig to pay for it, there's tendency to equate market price with intrinsic value.Comment: "sic."

All of these assumptions, in fact, are fundamental to the way most economists understand the world. They are the foundation for measuring output and productivity and they are the key variables in most economic models, from the simplest supply and demand curves to complex macroeconomic models.Comment: "sic" again.

Much of this work now goes under the banner of behavioral economics, which has been the subject of a number of best-selling books in recent years, as well as a number of recent Nobel Prizes. Much of behavioral economics, in turn, has focused on the seemingly crazy ways in which people and brices interact. In his new book, "PRICELESS" William Poundstone offers a thoroughly accessible and enjoyable tour of this research. Hill and Wang Publisher. 336 pp. $26.99

The author says:"We spend our lives searching for the lowest price, the highest salary, the most money - numbers by which to validate our happiness. The problem is that these numbers are neither as precise nor as meaningful as we assume.

It was more than a century ago that oscar Wilder famously observed that "people know the price of everything and the value of nothing." In "Priceless," we now have the proof. Pearlstein is a business and economics columnist for the Washington Post

Francis Shieh aka Xie Shihao is delighted to read such review to compare notes again with other thinkers to learn the nature of economics:"The ultimate success is what we contribute to our society for human happiness." Are YOU a rational economic actor/actress to play a role in the mundane world. My case rests here for your own judgment. Cf. archives for the topics online via www.Blogger.com Thanks and have a great day,everyday.

Sunday, January 17, 2010 at 12 noon.