Hello, Could you please help me with the below economics question? An economist

Question

Hello,

Could you please help me with the below economics question?

An economist uses both quantitative and qualitative data to justify their decisions. Modern economics, neoclassical economics in particular, often relies on probability.

Please review the below link for more information on the connection between probability and economics.

https://larspsyll.wordpress.com/2013/01/17/probability-and-economics/

1) Provide 3 reasons why you think that probability should always or should not always be used when making economic decisions or forecasting?

2) Do you think there are some instances where economic changes are based on sheer luck? Please provide 3 examples to justify your conclusions.

3) In general sense, can probability always be a reliable source for business decision-making? Why? Please provide 3 reasons.

Explanation / Answer

Quite a wonderful question weather to or not consider probability as a factor for decision making

1) Probability must always be used to make decisions, It is like a saying hope for the best and prepare for the worst must always be the policy of any business, Business in general is uncertain and probability and predictions are the only sets of parameters businesses depend on to take any future decision, For example: Earth quake resistant structure for manufacturing plant in Kawasaki City in Tokyo is a must, The probability of earthquake destroying building is very high

Earth quake resistant structure for example in Moscow would be useless as earthquake there is highly unlikely,

An insurance for theft and riots in Iceland maybe waste of money, but in south Africa it is highly recommened,

Every place and business situation will have its own risk and probability and businesses must not venture into some place where they are 100% probable to loose money

2) Sheer Luck can be a possibility to many people, but it is certain that only luck cannot be trusted as a engine of growth, The recent oil price fall has been super lucky for Indian government which was able to cut import bill by billions of dollars,

Oil price collapse is also boon for companies that are in energy business without reduction in tariff of power they can just get windfall profits

Shipping companies are also major beneficiers, Airlines is another lucky bunch

3) It is very much a reliable source, The probability of a foreign company encountering corruption problem in India or China is almost 99% , It is almost certain,

Probabilty of visa and border control problem that a company might face in United States is almost 80%, Which is very high,

Probability of incurring looses in major oil investment today is close to 100%, If you invest in oil industry now you are basically going bust,

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