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Showing posts with the label opportunity costs

Decision Making as Output and Bounded Rationality

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  The classical economics theories proceed on the assumption of rational agents. Rationality implies the economic agents undertake actions or exercise choices based on the cost-benefit analysis they undertake. The assumption further posits that there exists no information asymmetry and thus the agent is aware of all the costs and benefits associated with the choice he or she has exercised. The behavioral school contested the decision stating the decisions in practice are often irrational. Implied there is a continuous departure from rationality. Rationality in the views of the behavioral school is more an exception to the norm rather a rule. The past posts have discussed the limitations of this view by the behavioral school. Economics has often posited rationality in the context in which the choices are exercised rather than theoretical abstract view of rational action. Rational action in theory seems to be grounded in zero restraint situation yet in practice, there are numerous restra
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SEZs – To Have or Not: A Case of Opportunity Costs

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Ever since India started on the liberalization in 1991, policies regarding the establishment of Special Economic Zones (SEZ) have been fraught with controversy. Simply put, firms in SEZ location allows the developer to get the land, infrastructure, water, electricity and tax concessions thus enabling him to set up manufacturing and processing units in SEZ as opposed to in another location. Further the SEZ remains outside the jurisdiction of the national laws on labour and environment, firms secure an advantage) over non-SEZ locations.   Debate between proponents and opponents has rested upon the utility of these SEZs to the economy and the society. Proponents have claimed that SEZ enable channelizing of investment in sectors that hitherto had not attracted sufficient attention.   Studies have shown better wages and the forward and the backward linkages create spillovers in terms of greater infrastructure access to the local economy. However there are several costs atta
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Job- Family Balance: Trade Offs, Double Income and Single Income Families

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Many believe that job-family balance is strictly a time management issue. With many women and men reporting difficulties in constantly adjusting to the demands of the double duties of employment and family in an atmosphere of economic insecurity, demanding jobs, and unsupported workplaces, tradeoffs become essential.    Yet inspite of these perceived difficulties, we do find existence of both single income and double income families. Let us explore this phenomenon through a lens of an economist. Economics posits the presence of trade-offs. Studies indicate the existence of both employment trade-offs and family trade-offs.   The former refer to sacrifices that people make in their jobs because of their family responsibilities and the latter refers to the other way round.   As individuals offer themselves in the labour market, the benefits accrue through increased income, increased knowledge and consequent associated higher living standards. This however results in decreased t
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