Charles Wheelan is a lecturer in economics at Dartmouth and has authored five books. He joins us to discuss statistics, politics, and the economy.
Economics is the study of how we allocate scarce resources. Poverty, health, education, are all affected by how we allocate resources so understanding that can help us to do a better, more fair job at that allocating.
To make money, you have to produce value. Part of the reason for stagnant middle-class wages is because the value it used to produce is now being produced more cheaply, either through technology or outsourcing to countries where wages are very low.
To get rich you have to create value. Or steal money.Tweet This
Money is not the only factor in economics. Sometimes money can stop people from doing something. Organ donation for example. Tying it to money makes people less likely to do it. Sometimes altruism is a greater driver than monetary gain.
Most people will stay where you put them. Many people don’t save for retirement. Some companies now automatically enroll new employees in 401K plans. The employee is free to exit the plan or change it but most people will just default to what the company chose.
Sometimes a small guaranteed incentive is less effective than a larger, but not guaranteed one. Getting $5 each time you go to the gym is less attractive to people than going to the gym and being entered into a raffle to win a car. This is why people play the lottery.
Statistics are useful because they can be used to infer patterns. Recognizing and using the patterns can make you more money, or just help you to do things better. Which will probably earn you more money!
Most people are pretty poor at appreciating probability. So we worry about Ebola but cross against the light. But the odds of getting Ebola are much smaller than the odds of getting hit by a car.
Charles is a passive investor, an Index Fund guy. So the Dartmouth professor shares the LMM philosophy of buy and hold! The longer your horizon, the smoother the booms and busts level out for you.
Charles is very politically active. He advocates for a Centrist Party, where people who feel alienated by the Republicans and Democrats can join together. We need something better in the middle, where most of us dwell.
It was great to interview a guest who understands economics and is actively trying to improve the short comings of our current two party system.
Amazon: Charles Wheelan’s books.
Mint: The easy way to track your spending.
Betterment: The smart way to invest.