38. THE ESSENCE OF ECONOMIC THINKING

Economics, from my perspective, is one of the most important social sciences, as its essence and way of thinking provide a broader view that helps explain how the world works and the complexity of the decision-making process. Its definition illustrates this clearly, as economics is the social science that studies the choices individuals, businesses, governments, and societies make as they cope with scarcity and the incentives that influence those choices. Here, the keywords “choices,” “scarcity,” and “incentives” highlight the fundamental economic problem and how the world deals with it.

 

All economic questions arise from the fundamental reality that human wants are unlimited, while the resources available to satisfy them are limited, creating scarcity. Scarcity forces us to make choices, and every choice involves a trade-off, which means giving up one thing to get something else. These trade-offs may affect some groups positively and others negatively and create conflicts between self-interest and social interest. Therefore, cost-benefit analysis plays an important role in evaluating alternatives, while incentives influence behavior and can encourage people to accept or support particular choices. Therefore, understanding economics consequently requires knowledge of human behavior, psychology, sociology, politics, and management because economic decisions involve not only allocating scarce resources but also influencing behavior and balancing competing interests.

 

That is not the only problem; every choice also involves another fundamental economic concept called opportunity cost, which means that what we give up is the cost of what we get. More precisely, the opportunity cost of a choice is the value of the next best alternative we give up. Therefore, every decision has a cost, even when no money is directly involved, because choosing one alternative means sacrificing the benefits that could have been gained from another. This further increases the complexity of selecting among alternatives and, consequently, making decisions.

 

In life, every decision — whether in personal life, within an organization, or at the level of an entire country — involves choosing among alternatives while facing limited resources and unlimited ambitions, needs, and wants. Scarcity forces choice, choice involves trade-offs, and every choice carries an opportunity cost. This is the essence of economic thinking and the decision-making process, which involves using scarce resources to make the best possible choices while understanding what must be given up in return. This illustrates why decision-making can be so complex, as every choice comes with both benefits and sacrifices. Once again, life is so complicated.

 

Article By Dr. Eng. Amr H. Abayazeed - September 19, 2026.

37. DUNNING-KRUGER EFFECT

David Dunning and Justin Kruger are American social psychologists best known for their 1999 research on how people evaluate their own competence. Their work showed that people with limited skill or knowledge in a particular area may not only perform poorly but may also lack the ability to accurately recognize their own shortcomings. This phenomenon became known as the Dunning-Kruger Effect.

The Dunning-Kruger Effect is a concept that describes the relationship between knowledge and confidence. When we start learning about something new, we know very little. However, after gaining a small amount of knowledge, our confidence may rise very quickly. We begin to feel that we know and understand much more than we actually do. In the popular Dunning-Kruger curve, this is called the “Peak of Mount Stupid” — or, as we might say “حمار” in Egyptian slang. Then, as our knowledge increases. We begin to discover how complex things really are. We see things we did not even know existed. Our confidence drops, sometimes dramatically. This is often called the “Valley of Despair.” If we continue learning instead of giving up, our knowledge and experience gradually increase. We start understanding not only what works, but also why it works, when it works, and when it does not work. Our confidence begins to rise again, but this time it is supported by deeper knowledge and experience. This is the “Slope of Enlightenment.” Eventually, we may reach the “Plateau of Sustainability.” At this stage, confidence becomes more realistic. We know what we know, but perhaps more importantly, we understand the limits of our knowledge.

For me, however, I would draw the end of the curve a little differently. Instead of remaining completely flat, I believe it should gradually slope downward as our knowledge continues to increase. The more we learn, the more we become aware of how much we still do not know and how complex the world really is. In other words, greater knowledge should not necessarily produce greater confidence; sometimes, it produces greater humility and doubt.

“A little knowledge builds confidence; deeper knowledge brings humility”

 

Article By Dr. Eng. Amr H. Abayazeed - September 11, 2026.