Indifference is the truest wisdom

“Indifference” is a magic term in economics. For weird reasons that crop up when mathematical theory meets human nature, we confront the fact that you can’t really behave rationally unless you’ve become indifferent about something you want. That is, you have to not care about what you care about.

(Caution: Really Lousy Economic Explanation Ahead.)

The principle can’t be explained with mere prose, but I’ll take a lame stab at it. Let’s say you’ve got a basket of apples. I’ve got a basket of potatoes. Since you’ve got no potatoes, and I’ve got no apples, we can be expected to trade some apples and potatoes.

As we traded, as you got more and more potatoes (and had less and less apples), you’d be up against “diminishing marginal utility,” a three-dollar word for the fact that the more potatoes you’ve got, the less you value each additional potato. And, on the other side of the coin, you’d place greater value on each incremental apple that you give me, since as you trade them (for potatoes) you have less of them (apples), and consequently value each apple more than the last one that you traded away.

Anyway, you’re in a position where you are trading apples that you value more and more, for potatoes that you value less and less. Sooner or later, you’re going to hit a point where you don’t want to trade any more of your apples for my potatoes.

In fact, if you’re holding true to economic theory, you’ll be happiest at the point where you place equal value on the apple you’d be giving up and the potato that you’d receive in trade, when we contemplate our last transaction. That’s because of the way the whole “marginal utility” thing works out (take my word for it).

(Still not confused? Then read on…)

In other words, you’ve maximized your gains from trade when you are “indifferent.” “Come on,” I say, “gimme one more apple and I’ll give you one more potato.”

You think it over and say “Gee, well, I dunno. I value the two exactly the same. I don’t care. I’m indifferent.”

(Okay, we’re done with that gibberish. Now on to the good stuff.)

Economists love indifference. They write about it, draft big hairy equations about it, solve big hairy equations about it, talk about it, argue about it, think about it, and so forth. Indifference is where markets become optimal. It’s where the action is.

I’ve tried to apply this realm to everyday life, and I have striven to become as indifferent as possible about as much as possible. Some convoluted reasoning (the kind I specialize in) seems to indicate that maximum indifference is the key to true happiness–the key to an optimum outlook.

So I pay attention–a lot of attention–to the few things that I’ve chosen to care about, and I don’t really care about the rest.

Every so often, somebody takes it upon himself to enlighten me on the concerns of the world at large. This war, that war, this crusade, that crusade, blah, blah, blah. He (it’s always a “he,” for some reason) will then offer a pregnant pause after offering, “What do ya’ think about that?”

I usually shrug (pending a way to get away from such a bore) and say “I don’t really care.”

Face it: Most of what passes for “world news” these days is a reflection of mob neurosis. It’s so zany and illogical it’s fun to comment on and even laugh at, but to take it too seriously is to buy into the neurosis. So to remain indifferent–aloof, even–seems to be a happy path.

Stephens is an economist with Stephens Corporation, a professional organization in the NMI. His column appears three time a week: Wednesday, Thursday and Friday. Mr. Stephens can be contacted via the following e-mail address:ed4Saipan@yahoo.com.