Tuesday, October 23, 2012

Real fire caused by imaginary cigarette

Good evening everyone. In the world of economic theory we often talk about simplifying assumptions. The problem with these assumptions is that sometimes they simply do not represent reality. For example not all people are selfish utility maximizers who only think about themselves. What happens when an assumption goes wrong?

I was reading the news today when I came across a story which depicts the impact of assumption failure. Apparently, a patient in the University of Michigan at Ann Arbor Hospital attempted to light a cigarette, causing a fire to break out which resulted to a nurse sustaining minor injuries. Now I know what you are thinking...Why in the world would he light up a cigarette in a hospital room? Why not step outside?
It turns out that THERE WAS NO CIGARETTE to begin with. The patient was assuming that he had an imaginary cigarette which he attempted to light. His bedding was torched!

This is what happens in real life as well. When economic theories are based on false assumptions they end up torching the economy. Something like what we see today in the form of the recession.

Have an assumption free day!

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