Time and Economics (and Planning)

“It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only those individuals know”.- Friedrich von Hayek

Let us start by placing a few definitions to clarify Mario Rizzo‘s discussion.  Let me also apologize because the lecture is over an hour long.

ex antebefore the event

ex postafter the action

Around the 11 minute mark, Rizzo talks about some decisions that individuals make that may work against their ultimate goals.  I placed Dan Ariely‘s video on individuals acting predictably irrational below so you can get the flavor of another school of thought and the work in behavior economics.

I was listening to Rizzo’s lecture this morning and kept thinking about the individual planning industry and how Hayek’s work fits so well in articulating what the planner should be helping the client accomplish.  Working with clients’ goals is not only the economic problem.  It ultimately is the coordination problem of their perceived life, the life they choose to live, and the life they wish to live.  The reality of their choices also forces adjustments as their values change or life happens around them.

My criticism of the financial services industry is typically based in the lack of insight into this coordination problem, how inflexible many solutions are for the client, and how the person giving the advice is rewarded for their expertise.  Those incentives are not always aligned.


About Christopher Hessenflow

Christopher Hessenflow is a financial planner in the Chicago area. He works with all sorts of people who are much more interesting than he is. He enjoys his career which lends him time to think and, sometimes, be creative. Chip was born bald.
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