The author, Jessica Irvine, propose a method to cure hangover by economics through the article “Economists discover miracle hangover cure: drink less”. In this article, the author presents the model by giving an example of Chris who passed a very busy week, and in the weekend, he went to a bar to drink schooner. After drinking two bottle of schooner he compared the marginal benefit of drinking another schooner and opportunity cost of it and decided to go back to home. The author tried to make everyone understand that it might be happened if every human can become rational and have the knowledge of economics the hangover can be cured. She also mentioned some limitation of the assumption.
In this article, two basic assumptions are used by the economists. The assumptions are scarcity of resources and economists ruled the world, in another word, human are all rational individuals.
According to (Joshua Gans, Stephen King, Robin Stonecash, Martin Byford, Jan Libich, N. Gregory Mankiw.,2018) these two assumptions are important to economists to develop theory and building models First assumption is important because society has limited resources so people cannot produce all the good and services which they want to get. For this reasonpeople need to allocate the limited resources to make it efficient. And the second assumption is important because people are rational individuals who want to make their consumption to maximize their utility or happiness, likewise their preference. They will consider the opportunity cost of their action as well as the upfront cost of their action. Moreover, they will also consider all the consequences of their actions.
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It is important that people using the models developed by economists know and understand these assumptions because rational individuals can predict about the happiness or utility of an activity or a good procedure for them now and future and they can maximise their happiness or utility (Stutzer, A., & Frey, B. S. 2006)). In this article Chris had economics knowledge and he considered the situation in economic point of view. He found, if he drank another beer, the next day he had to spend Saturday sleeping in and he would feel very unwell to attend his friends barbecue party. When he compared current activity with next best alternative like he may play in his new playStation and catalogue his stamp collection in the next day which is more pleasure and enjoyable. Chris can maximize his own benefits and utility by deciding to go back to home.
In this case, drinking one more schooner is the opportunity cost to Chris of going home to plan PlayStation because it makes him feel good and pleasing experience. In comparison, the benefits of drinking another schooner and opportunity cost of playing PlayStation and cataloguing his stamp collection, he decided to go back to home because it is pleasure and better feeling than drinking schooner. This is why, the journalist Jassica, believe that ‘Hangovers are only possible because ordinary humans often do not fit the model of rational individuals prescribed by economists’.
Jessica argues ‘Hangovers are only possible because ordinary humans often do not fit the model of rational individuals prescribed by economists’ because she thinks people always consider upfront cost like the cost of beer. People are not good at calculating the opportunity cost like what are the best alternatives he can do. The another reason of Jessica’s argument is human is emotional. Most people are simple prone to herd behavior, so people will do what other people do without consideration.
The journalist, Jassica argument is not necessarily true, because hangover may still happen in case that all people are rational. Rational people will take more drinks if the opportunity cost of taking more drinks is much smaller than the benefit. For example, a garments company failed to deliver some big shipment on time to some international buyers. As a result, all buyers canceled the contract. In this situation the owner of the garments company owner will think, taking more drinks will help him to draw a blank of his business failure. Drinking more can give him enjoyable experience and can have a nice sleep. In this case the opportunity cost of taking more drinks is that he cannot stay awake in the morning. It has a big chance that man will take more drinks to forget his business fails.
Rational people will think at the margin. When they choose between alternatives, they will consider some marginal changes like marginal benefits (marginal revenue, marginal utility) and marginal cost. If the rational people find the marginal revenue is less then the marginal cost then they don’t go for the action.
In this article the marginal revenue of Chris was good feelins and pleasing experience when he was drinking first and second schooners and the opportunity cost was the amount of timeof staying in the bar as well as playing new PlayStation. But when he took his third beer, the marginal revenue remained same, the opportunity cost become higher. After traking third beer he would become hangover for the next day, he could would feel unwell to attend barbecue party and he could not catalogue his stam collection properly. When he drand the third beer, his marginal revenue become lower than the marginal cost. For this reason he stopped drinking and went back to home.
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To conclude, according to the article, it shows that the problem of hangover cure will be solved if the economists rule the world or people are rational. However, this article is a case that it might work in theory, but it doesn’t work in practice. There are few reasons causing for this result. The first reason is the human are not good at factoring opportunity cost. they think a very simple way like human think about the beer cost not the opportunity cost of the beer. So, in practical life this model will not work because of cannot think like a rational. Secondly, this model is not suitable for reality. People drinks beer for different purposes. Depending on the situation this model will not fit properly. The final reason is human is emotional and cannot choose the best decision because of the complication of environment and limited thinking ability,decision makers cannot analyze properly each and every factors. Thus best decision cannot be taken by the rational human.
- (Joshua Gans, Stephen King, Robin Stonecash, Martin Byford, Jan Libich, N. Gregory Mankiw.,2018).
- Principles of economics 7th edition. South Melbourne, Victoria: Cengage Australia.
- Irvine, J. (2009, October 3). Economists discover miracle hangover cure: drink less. Sydney Moring Herald.
- Stutzer, A., & Frey, B. S. (2006). What happiness research can tell us about self-control problems and utility misprediction. Institute for Empirical Research in Economics Working Paper, (267).
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