Living at the Margin
In our world of scarcity, we constantly have to make choices. Making them The Best Forex Trading System Ever sensibly requires comparing the value of alternatives. But we seldom have to make choices between all of one thing or all of another. For example, we don’t choose between food but no clothes and clothes but no food. If we did, the choice would be between eating in the nude or starving in style.
Fortunately, we make most decisions at the margin, choosing a little bit more of one thing at the cost of having a little bit less of something else. So the comparisons we make are between the marginal values of goods— the value of another unit of the good. It is sensible to spend our money on a variety of things, with an extra dollar going for the product with the greatest marginal value.
People recognize the importance of comparing marginal values in their personal choices, which explains why even very poor people usually wear clothes when they dine. But people commonly take positions Ten Pips a Day that ignore the importance of comparing marginal values.
For example, we have all heard arguments like this one: Something is wrong with the economy when wrestling stars are paid a lot more than nurses, since nurses are obviously more valuable than wrestlers. As we will see, such arguments sound plausible but are flawed because they ignore the importance of marginal considerations. For a long time, even economists didn’t understand marginal arguments.
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