Monday, May 23, 2022

Economics vs Finance

Economics and finance are not the same thing they're related but they're distinct I think some of our economic problems and financial troubles begin when we get the two mixed up so let me clarify the difference in economics we asked two questions is this profitable and how can I make it even more profitable let's say that there's a .

Hundred thousand dollar investment that will produce a two hundred thousand dollar return by the end of the year economically we'd say hot dog how do I make this happen we might also ask how can I make it even more profitable economics is really the question of should I do this finances the question can I do it where .

Am I going to come up with a hundred thousand dollars can I get the startup capital well let's say that I get the startup capital and all that profit happens at the end of the year how will I pay my bills in the meantime how does the cash flow that's another financial question of course there's one more issue when it .

Comes to money taxes what are the tax consequences of our enterprise what order do you think these things should come in what order do you think most people put them in a lot of people put tax avoidance first finance second and economics third if at all but economics must come first it's just common sense let's say we invest a hundred thousand .

Dollars and lose it all do we want to find the startup capital to make that happen of course not we think income tax problems are good problems to have so it's economics first finance second and taxes third that's the order you're going to put these in if you're ranching for profit .

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