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Tag Archives: 3 economic questions

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Queue is now a game. But not always.

In Poland, during the 1970s, you might have taken an hour or two off from work, rotating with a brother or sister, to stand in line. Everyone could have been waiting for a pair of shoes but if a shampoo were available, you bought it. There were even queue rules like mothers with small children got to go first. So people temporarily borrowed small children.

The creators of the game Queue want to remind us that while the game is “great fun, … Queue reconstructs a reality which, for the people who lived it, was no fun at all.” So players have a shopping list that is virtually impossible to locate. To win they need to outsmart meat shortages, surly salespeople, long lines and dishonest officials. They experience corruption, a black market, and frustration. And unintentionally, there really were shortages because Queue’s developers had not produced enough games.

I downloaded a free English version of the game that includes a fascinating description of the Polish Communist-era command economy. It even includes several pages of Polish political jokes about Communism:

  • A symptom of memory loss: when you find yourself standing with empty shopping bags in front of a store and cannot tell whether you were going in or coming out.
  • What is it: a many-legged creature that is at least 20 meters long and eats meat yet has to make do with potatoes? The queue in front of the meat store.

Or here is their quote from a Polish citizen who describes his trip to London:

  • “…when I first went to London–on an official visit–I photographed sausages, ham, and meat displayed in store windows. Later, I would show these photos to friends, explaining that you really can go into a store and buy these things just like that. These were shocking revelations.”

Our bottom line? Through Queue, we can see the perverse incentives that a command economy creates. The game reminds us that when a small group of people tell all of us how to answer the 3 basic economic questions (below), we respond to counterproductive incentives. The result is multiple inefficiencies and wasteful transaction costs like queues.

3 economic questions that all economies answer:

  • What goods and services should be produced?
  • How should goods and services be produced?
  • Who should receive the income?

Sources and Resources: I first read about Queue in this WSJ article. However, the English translation of the game says it all. Finally, to identify contemporary command economies, the Index of Economic Freedom is always a handy resource.

A Communist Queue

A Communist Queue

 

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Is political upheaval fueled by corruption? Low GDP per person? Less democracy?

This Economist interactive indicator lists 9 variables. Together they add up to 100%. But the question for readers is how to weight the variables. Which ones could create a revolution? 

Then, based on your data, the Economist ranks 17 nations, most from the Middle East and North Africa, as your “index of unrest.” Would you select corruption as a major cause of unrest? Iraq, Yemen, and Mauritania are most likely to experience upheaval. If, instead, you say that countries with a large population under 25 are most vulnerable, then Egypt tops the list while Yemen is second.

Looking at the Economist’s unrest indicator, you can see why the Saudis, Oman, and Bahrain all are increasing state spending. Saudi Arabia’s plans include $36 billion for “interest-free home loans, unemployment assistance and debt forgiveness.”

The Economic Lesson

Because land, labor, and capital are scarce, every nation has to answer the 3 basic economic questions: What will be produced? How will goods and services be produced? To whom will income go?

Political upheaval changes the answers to the 3 basic economic questions.

An Economic Question: How might political upheaval, during unrest and after, change the answers to the 3 basic economic questions?

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I am concerned that the word “ration” has a bad reputation. In a recent CBS story about a new Medicare/Medicaid head, and throughout the healthcare reform debate, stories about reputed “rationing” kept popping up. There was no need, though, to search for examples because rationing is everywhere. Healthcare has always been rationed because its supply is limited. 

Actually, the supply of everything is limited. As a result, societies have to have a way to decide who gets what. They have to ration. In the U.S., most goods and services are rationed through a market system. In the market system, prices act as a rationing mechanism. For example, when price rises, consumers typically buy less. 

During World War II, rationing was more extreme. With very limited domestic quantities of such goods as butter, sugar, and gasoline, consumers were allocated specific amounts through books of coupons. Others, hoping to buy more than their coupon totals, located black markets in which an illegal demand and supply price system also rationed goods.

It is true that we usually use the word ration to describe a more extreme drop in distribution. Still though, I hope we will remember that whether we have a lot or a little, still a limited amount has to be allocated. As a result, everyday, our economy rations pizza and eggs and doctor’s appointments.

The Economic Lesson

In order to produce and distribute goods and services, all societies have to answer three basic economic questions: 1)What goods and services should we produce? 2) How will land, labor, and capital be used to produce goods and services? 3) To whom will incomes go?

Societies have answered “what, how, and to whom” using three basic systems: 1) the market: demand and supply, 2) command: someone decides and others obey, 3) tradition: the same tasks are passed down through generations

The market, command, and tradition are all rationing systems.

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