Long Run vs. Short Run

The famous economist John Maynard Keynes once wrote, “In the long run we are all dead.” That remark has often been interpreted as meaning Keynes and his subsequent followers only cared about the short run, that they would always advocate rash policies designed to generate short term benefits and ignore any long term consequences.

Of course, one can argue that politicians love that kind of thinking because they can “buy” votes and support with short term stimulative policies and then be gone when the chickens come home to roost. Anyway…in this piece Simon Taylor, a member of the finance faculty at Cambridge Judge Business School, wrote:

 

“It should be clear that he is not arguing that we should recklessly enjoy the present and let the future go hang. He is exasperated with the view of mainstream economists [of the time] that the economy is an equilibrium system which will eventually return to a point of balance, so long as the government doesn’t interfere and if we are only willing to wait. He later challenged that view in his most important work The General Theory of Employment, Interest and Money (1935) arguing that the economy can slip into a long term underemployment equilibrium from which only government policy can rescue it.”

 

By the way, the full Keynes comment (written in 1923) was, “The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again.”

OK, why am I writing about this idea today? Well, it’s because of something that, in the grand scheme of things, is not really important. I am, of course, writing about my Z06.

I have been writing about all of the potential modifications I want to do to the car, both in terms of performance and appearance. Obviously, I don’t have to do anything to the car; it’s great as it is. The amount of money needed to do what I want is a tiny fraction of my available resources, but some would argue (and have) that it is better for me to save the money just in case it is needed at some future time.

This is a classic long run vs. short run problem, in my opinion. No, this is not an excuse to show another picture of my car. I am not going to do so.

I believe that both the short run and the long run matter and that’s why decision making can be so difficult. Of course as one grows older the long run gets shorter. It is very difficult–perhaps impossible–to fully understand the potential long run consequences of many decisions, but that doesn’t mean the long run can be ignored.

So, while I am preparing to spend what I need to spend to modify the car, especially in terms of performance, my brain is waged in a battle of long run vs. short run. Are any of you in a similar situation? Do you classify yourself as a long run person, a short run person, or an it depends person?

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My wonderful wife sent me this link to a story about “vintage” cars we shouldn’t forget. The problem is that the article lists 40 cars and you have to click on them one at a time. (A real tangent: why do I always type tiime the first time I try to type the word time?)

The cars range in time from the 1950s to the 1990s and include such disparate vehicles as the GMC Syclone and the Studebaker Lark. You also might not be able to click on all 40 vehicles as the website gets slower with each successive click and might time you out.

One of the cars listed is one that has been mentioned a lot here, the C4 Corvette. From fastlanecars a picture of a 1996 Corvette, the last year of the long-running C4:

 

 

As I have often written before, I have only been a fan of the C4 Corvette for about the last five years. Before, I thought they looked too plain and that before 1992 they simply were not good performers (ZR-1 excluded).

The looks of the car have grown on me and 1992-1996 Corvettes have plenty of performance, thank you. In fact, if you can be that picky, the 1995-96 cars are the best of the bunch, in my opinion, because of improvements like fuel injectors that were revised to better cope with ethanol content in gasoline, improved connecting rods, improved automatic and manual transmissions, various upgrades to reduce rattles, etc.

I’m not in the market for another Corvette, but in the event of a large financial windfall, one of these could be in play, especially a convertible. I guess my wonderful wife’s affinity for ragtops has rubbed off on me.

 

#LongRunvsShortRun

#JohnMaynardKeynes

#C4Corvette

#somanycarsjustonelife

#disaffectedmusings

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12 thoughts on “Long Run vs. Short Run

  1. “some would argue (and have) that it is better for me to save the money just in case it is needed at some future time”

    The conundrum is: what is a proper amount to have for the future? For some folks a savings account with $10,000 is a fantastic sum. For others $10,000,000 isn’t enough. Throw in not being able to see into the future and there is no way of knowing what tomorrow brings. I have always been of the the theory that I might get squashed by a bus on my commute today, so why not spend what I, and I alone, think is prudent on whatever I choose? Yes I will have a “rainy day fund”, but it’s an amount that I feel is adequate, NOT what someone else thinks I should have. This has led to disagreements with financial advisers I have used in the past, family members who squeeze a penny so hard that Lincoln whimpers in pain, and friends and associates that look on in amazement at the things I buy.

    TL:DR. Spend what YOU are comfortable with and who cares what others think.

    As long as the wife lets you. 🙂

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    1. Thanks, DDM. Your sentiments are very well expressed. Of course, it is a matter of judgment what the “right” present/future balance is for almost all decisions, especially with money.

      Despite being Jewish, I did not grow up with money. You cannot imagine the paltry amount my father was supposed to pay in alimony and child support after my parents divorced AND that was when he paid the court-mandated amounts, which was not always. Even before the divorce, we did not live high off the hog. Part of me will always be the kid without lots of money.

      That cuts both ways, though. My upbringing gives me caution about spending, but on the flip side wants me to enjoy things I couldn’t have afforded when younger. I can tell you, though, I have acquaintances who have run out of money in retirement and that situation is brutal.

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      1. “I have acquaintances who have run out of money in retirement and that situation is brutal.”

        With the way things are going currently with government spending, eye watering inflation of many items (including food), civil unrest and world “sabre rattling”, there is a possibility that the $10,000,000 figure I referenced might not be adequate. I also know folks who have had to curtail certain activities and spending in general, due to not having the needed funds. And yes, it’s not pleasant to see.

        While I’m not Jewish, similarly we were not wealthy. Dad worked, mom stayed home, we were pretty much “middle” middle class. Dad was an aircraft toolmaker so made good blue collar money. We never wanted for necessities, but we also didn’t take vacations to Atlantic City. I learned early to build/repair what I wanted and make do with less than others I knew. I spent a year building my first car to have it available when I got my license. Insurance and registration was paid by me also. My dad DID help with building the car, and would LOAN me money on occasion for parts but the money all ended up coming from me. Over the years I’ve done OK and have been able to indulge myself for a number of years.

        Hopefully I will be able to continue those choices into the future as at least semi retirement is in my future (I’m on my 64th trip around the sun).

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      2. Thanks, DDM. While I share your concerns about what might happen in the future, I am 99% sure that I will not live to see the day that a $10,000,000 nest egg is inadequate UNLESS the person/family simply has no self-control. DSFDF/YMMV

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      3. Myself, I HOPE to not see the day when $10,000,000 isn’t enough. Because if 10 isn’t enough, 100 wouldn’t be either.

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  2. Perspective can be a funny thing sometimes. I quickly scrolled the article on the 40 cars they’d ‘almost forgot about’ and chuckled a little.
    Admittedly, I have a deep interest in old cars. I attend a good number of car shows, know quite a few owners of old cars. I read a lot about cars. So the funny thing is that article is probably aimed at someone like me who’d appreciate seeing the cars, and at the same time I’m reading it saying “how is anyone ‘almost forgetting’ GTOs or GS455s or GNXs or CRXs or Datsun 240s?”
    That said, I liked seeing the 65 Pontiac 2+2 off the top. True, the 2+2 got knocked to the background once the GTO arrived. More personally, an 84 year old friend of mine drives the Canadian equivalent, a 65 Pontiac Parisienne Custom Sport convertible. True it’s a Chev Impala underneath with a 327 in it, but it’s a very pretty car. Hard to believe I haven’t seen the car in person since fall 2019, or Henry (my friend) since February 2020.

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    1. Thanks, Mark, for offering your perspective. One problem in “journalism” is how much knowledge to assume on the part of the readers. I try not to write “down” to my readers, but sometimes find myself explaining something I don’t really want to explain.

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      1. I know exactly what you mean, especially when I post photos. I try to write something that will give some background to those people who aren’t car enthusiasts, and hopefully I’m not talking down to those who instantly recognize the car.

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      2. In what I think was the last edition of his ground-breaking Baseball Abstract, Bill James wrote something to the effect that having a very strong appeal to some portion of the public, almost regardless of how small, was a better indicator of quality than having mass appeal. Of course, I could look it up–his books are just a couple of feet from my desk–but…

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  3. In the last couple of years, I finally felt comfortable increasing my travel budget without fear that I might run out my “rainy day” funds. Then the Pandemic hit. I still want to return to my original travel plans, but have modified them to be less “world traveler” and more “back yard” in nature.
    I don’t expect to “see the world,” but I’d like to see Europe before I get hit by that proverbial bus.
    Given the state of the pandemic, that might not be possible for a year or two yet. In the meantime, there are plenty of places to see in the great outdoors of America.

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    1. Thanks, JS. Before the damn virus I thought I had one more trip to Europe in me; now, I’m not so sure. Given our proximity to western Canada (it’s only a 3-hour flight to Calgary, for example), that may be the next travel destination for my wonderful wife and me. Then again, maybe not.

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