Thursday, September 18, 2008

Economics: Part 1

I may have an economics degree but I don't put it to any good use and so it has withered away.  

Now that I've gotten that out of the way, I've been thinking about economics recently and formulating some observations, which I will build upon over time here on this blog.  My first question was why economics did not have a similar "conservation of mass" philosophy that benefits so many theorems in science.

Starting with a very simple system of 2 people on an island, if we each give them one useful and divisible commodity, they will quickly assign a value to each item and determine a solution to share their resources.

So person A has 10 seeds and $100 and person B has 10 seeds and $100, they could each decide to trade 5 seeds and both diversify their seeds.  That would be one logical solution that would seem to be fair given the circumstances.  Instead, let's say that they decide to plant their seeds without trading, and A's seeds sprout and bear fruit but B's seeds don't do anything.  There's new information in the economic system that B's seeds are worthless, so B will have to provide money or services if they expect to trade with A.  Regardless of the outcome and even as information changes, there is always a set value in an ecosystem, although the value may vary depending on the audience.  (to be continued)

No comments: