Tuesday, May 17, 2011

Two Economists

An experienced economist and a not-so-experienced economist were walking down the road. They came across a pile of horse manure lying on the asphalt.

Experienced economist: "If you eat it I'll give you $20,000!"

The not-so-experienced economist ran his optimization problem and figured out he's better off eating it so he did and collected the money.

Continuing along the same road they came across another pile of horse manure.

The not-so-experienced economist said, "Now, if YOU eat this I’ll give YOU $20,000."

After evaluating the proposal the experienced economist ate it and collected the money.

They went on. The not-so-experienced economist started thinking, "Listen, we both have the same amount of money we had before, but we both ate horse manure. I don't see us being better off."

The experienced economist replied, "Well, that's true, but you overlooked the fact that we've been just involved in $40,000 of trade."

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