Morgan,
J. N. (1995). Justifying the use of economic insights in ordinary decisions.
Financial Counseling and Planning, 6, 45-52.
Justifying the Use of Economic Insights in Ordinary
Decisions
James N. Morgan
(1)
The benefit-cost approach to economic
choices turns out to require only four basic rules, though they imply also a
principle, namely that only the future really matters, not the past. The four
rules are: (1) convert all values to the present times; (2) reduce all values
for uncertainty; (3) all values must be aftertax; (4) non-money costs and
benefits should be considered. These rules are explained and illustrated by
working through the most difficult of economic choices: deciding how much to
save.
Key Words: benefit-cost, economic insights, rational choices, retirement planning
1. James Morgan, Research Scientist, Economics, University of Michigan, Institute for Social Research, P.O. Box 1248, Ann Arbor, MI 48109. Phone: (313) 764-8388 Fax: (313) 747-4575. E-mail: jnmorgan@umich.edu.
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