2 posts tagged “groundhog day”
The Economics of Groundhog Day
By DW MacKenzie
In Groundhog Day Bill Murray plays Phil Connors, a man who relives a particular day — Groundhog Day — many times. In the first instance Phil Connors lives through this day quite imperfectly.
After committing numerous errors he goes to sleep. When he awakens, time has turned back twenty-four hours. He is about to relive the same day. Since no one else remembers having lived this day before, Connors can relive it knowing more about what will happen than he did the first time. After reliving this same day hundreds of times, he learns how to live it perfectly, not just for him, but for others too.
How does this movie relate to economics? The first time through, the day is highly imperfect because Connors lacks knowledge concerning what will happen. He lacks knowledge of how to take best advantage of what will happen during the day. By his final iteration of Groundhog Day, he has acquired virtually perfect information on how to act during this particular day, given how everyone else will react.
In economic terms the final reliving of the day constitutes what economists refer to as a perfectly competitive equilibrium based on perfect information. With full knowledge of how to realize every possible gain during this day, Connors is able take advantage of every opportunity for gain. The difference between his first time through the day and his final reliving are dramatic. While this is of course only a movie, it does serve to illustrate the wide gulf between the economists' notion of perfectly competitive equilibrium and reality.
via Mises
Though this is an older story it's not only great because it comes from one of my favorite institutes but about one of my favorite movies!
