Tuesday, April 26, 2005

The beginnings of an economy

Modern economies are highly complex and involve tons of advanced mathematics and science. But how did all this happen. When and how did the first economies develop? What were these like. What affected them? How did they grow into what they are today? Here's a simplified look.

Well first, let's imagine a little scenario. Farming has just started and there's a little vilage in the middle of a big green field next to a river. Farming takes a lot of work, eventually people find ways to make things easier, like irrigation and draft animals, but those things also need work and care. So the farmers get some guys to do this for them. First the guys, who were kind of bored, go sure, for the community right? And now they have a settled home and a share of the crop. So after a while they learn the trade and start working. For now this resembles a primitive socialist environment, there is no one in charge, just a bunch of farmers and some guys who help them, settled in a village. There may be a few elders who are too old to work and give advice, but everybody gets paid for working in only two ways, shelter and a share of the crop.

What happens now is that these new guys get so good, the farms need less people, these people now are just lying around there. Some start new farms, others join those that take care of all the extra stuff. A few though start thinking, this life is boring, all you do is work all day and sleep all night. The only rewards are a hut and some of that boring barley and chicken that they always give. If only there was something else to do. So, as certain jobs become more and more labor-efficient, more and more people are no longer needed. Here we can see the beginnings of unemployment, these people just want to do something different.

One day, a group of explorers from a distant village arrives at their home. And everything turns upside-down.


GeoBandy said...

Hey Scriptor, sorry I left you hanging on this, but I thought someone had sent me instructions on how to install Haloscan without losing previous comments...actually, they just sent me a warning about losing existing comments. AFTER mine were already gone. I've been following your "influence" posts. Good stuff.

Tom said...

You've forgotten Say's Law, and the refutations of the immortal fallacy that increased productivity means anything other than increased employment and a higher standard of living. Read Bastiat's The Law and Economic Harmonies for beautiful and funny refutations of such fallacies.

Increased marginal productivity, whether it is a better flint tool or a faster industrial mixer, produces more employment and contributes to higher standards of living.