Economic vs. Accounting Profits

In today’s world, especially in the United States we have the opportunity of deciding on a career of our choice. I believe the first thing factor many people look at when deciding is money. However, ultimately most people settle into something they enjoy doing, instead of how much money they will make.

I have a brother-in-law that is currently serving in the armed forces. He and his new wife are struggling to pay the bills, but they have the opportunity to fly, and see the world at not cost to them. In fact, he and his wife are going to Egypt in a couple of weeks. In fact he has seen more of the world than I have, and probably more than most people as well. To my brother-in-law, the opportunity to see the world instead of a heavy paycheck makes him happy; economic vs. accounting profits.

Myself, I would not enjoy serving in the armed forces, because I am not a big flyer. Therefore the benefits from different jobs depend on the individual. What someone calls a benefit, others may call, (for lace of better words) a loss.


Tom said...

Ya, Professor Tufte said during the beginning of principles of macroeconomics class that we as students would know more about the economy just in the first day of class than most of the world. Everyone should take an economics course because of things like accounting profits and economic profits. Sure people might think about what they value but they would not put it to terms like how an economics class would teach you. Sure, just because there might be a lot of money involved with taking a job (accounting profits) doesn't mean it's going to be that much better for you. I would dare to venture that most people function with economic profits in mind rather than accounting profits.

Dr. Tufte said...

-1 on Jim's post for a spelling error.

I think the real issue is not between accounting and economic measures. It is that accounting offers a precise and well understood measure of profits that clearly can't explain everything. Economists assert that there has to be other stuff influencing people's decisions in order to reconcile how people behave. We just can't measure that as well. So you have a tradeoff between precise but incomplete, and imprecise but complete.

Tom - are you trying to butter me up for extra credit?