7.06.2005

Shoes and the Economy

It's Day Three without sugar and Econo-Girl is dragging.

One of her favorite books, sure to lift her spirits, is "The Hitchhiker's Guide to the Galaxy." In it, there is this strange planet where the entire economy is based on the manufacture and sale of shoes. It's a wonderful satire of an economic bubble.

On planet Earth these days, economists herald the virtues of specialization, where a country specializes in manufacturing a certain type of product and then trades with another country that makes something else. The idea is that by specializing, a country can lower overhead costs and make it cheaper than anyone else. Then the marketplace will be efficient!

And this is what is starting to happen. The US can produce grain cheaper than local, third-world farmers. And once let into the market, the locals are out of luck. Is this really a good thing? Doesn't it lend itself towards stability if a place is a little self-supporting in the matter of food? And what are the ramifications if all these local people are suddenly out of cash? It sucks the wind right out of the national economy.

So we really need to think about the fallout of some of these theories.

6 comments:

The Lazy Iguana said...

That is why they are theories and not laws.

thedeviluno said...

I dont understand economics, could you dumb it down a bit?

Saur♥Kraut said...

Macroeconomics is so difficult, though. There are always so many variables. For some reason, I did so much better with microeconomics. However, the third world countries would probably impose tariffs to even everything out - wouldn't you agree?

P.S. The Hitchhiker's Guide to the Galaxy is one of my great faves, too. I was sad that the movie just couldn't capture the spirit of the book. But, of course, I don't really suppose that it could.

Econo-Girl said...

OK, it's like this:

If every country on Earth makes only one thing, sure they could make it cheaper than anyone else because everything is geared towards making that one thing.

BUT - if something disrupts the flow of goods, like a war or natural disaster, then the country won't have as many people to sell to. And then the whole country is screwed. Because they are not hedging their bets with making a lot of stuff.

International economics says that countries should specialize in what they make. Econo-Girl says NO! International economics also prefers reducing trade barriers. So all the local farmers in third world countries can be driven out of business by cheaper U.S. fruit and vegetables. This is supposed to be a good thing?

Lizy said...

Interesting article..thanks for the post..how come a countries economy can be based on the manufacture and sale of shoes.Cant understand.

Fashion said...

The amount to manufacturing the shoes may be high...But we can buy the quality Carolina shoesat economical price..!!!fantastic post!!!!!