Economic Parables Part 1 – A Flat Market

In order to understand economics, it is helpful to think on a small scale. I’m hoping to build simple modelfor all to understand. I will build upon this model and I encourage feedback, why, and what-if questions. I make no claim to having economic authority so this is for me as much as anything else. Let’s begin

A flat market

John raises chickens. He is the only man in the entire nation. What is the value of his chickens? Zero. There is no one to trade his chickens to for something in return. 

to be continued…

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4 Responses to Economic Parables Part 1 – A Flat Market

  1. Chris says:

    Hey Rick,

    I love this kind of exercise; it’s an extremely useful way of distilling complex information.

    I agree that the chickens have no monetary value because money, by definition, requires trade. There is, however, another way to determine value–supply and demand. If John needs chickens but has only two chickens and a wolf kills one, then the remaining chicken has increased greatly in value. Conversely, if John has hundreds of chickens and he can’t find a single use for even one chicken, they are of no value.

    Supply and demand is so powerful that it works even when there is only one lonely guy and his chickens.

    PS here’s a great article that addresses the housing bubble and credit crises by chronicling the lives of the imaginary people of ‘Sushi Island.’

    <a href=”http://www.mises.org/story/3155″

  2. Rick says:

    Chris- great thoughts. I’ve laid out several articles that will publish over the next few days. You understand economics better than me, so keep me in check. I think it would be great to think all this through and solidify some useful, simple examples to then republish in a more permanent format. Perhaps we should start a website for just our best materials? I met a guy who had success doing a lot with technology to promote political views… but in NY you can guess what those views were.

  3. Chris says:

    Cool. I can’t wait to see the upcoming food-for-though.

    I’m totally open to the idea of our own best-of site. It also gives us the opportunity to pool resources on endeavors too time-consuming for one person.

  4. bchallies says:

    Got that! Mom

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