Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Thursday, August 25, 2005

Dishing Out Peanuts to Monkeys

Dear Economist, by Tim Harford, tells of a church pastor trying to replicate the parable of the talents by giving 10£ to each of the parishoners, with the hope they will be able to invest it wisely and double their money on behalf of the church. Harford is less than optimistic:

...remember that biblical Judea was severely capital-constrained. Anyone lucky enough to have investment capital had a great choice of projects and 100 per cent returns were not uncommon. A comparable present-day return on your money might be 10 per cent, or £1. Had Jesus wished to tell a parable about extraordinary investment savvy, he’d have said that the slaves quintupled the money.

Second, a “talent” was worth £550 or more in today’s money, the kind of sum that would fund participation in a significant venture. And third, household slaves were experienced money-managers. In contrast, your church is dishing out peanuts to monkeys.

Most serious of all, the parable of the talents has a master entrusting money to slaves who could not run away. You, on the other hand, are a free agent.

I usually hesitate to proffer investment advice but, since you ask, there is nothing to constrain you from investing your £10 in a round of drinks.
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