8 Jun 2012

Convex beer and pizza

Economists have codified what appears to be a universal human taste, i.e., our "convex preferences" mean that we like to consume a mix of items (beer and pizza, fast but comfortable car, etc.) instead of 100 percent of an item.

The implication is not just that people need the freedom to consume a mix of items (not all or nothing) but also that it's good to hedge your bets -- don't put all you eggs in one basket.

Does this make sense? Can you give a counter-example of when you wanted only one thing for the duration of time that you had access to other substitutes or complements to that thing?