Archive for the ‘Models’ Category

Different :domains:

May 18, 2012

Different domains have different errors. Can’t see why they don’t have the same errors.



May 9, 2012

White beauty.

Of course, this is for everyone

Parable of the fishing tribe

March 24, 2009

Consider a fishing tribe, who fortuitously find themselves living on the banks of a virgin river.

They are living by spear fishing.  The adults in the group catch enough fish every day to feed themselves and their dependents.  There being no refrigerators, in a day, they catch as much fish as the combined stomachs of the tribe can accomodate in a day.  They have thus two sources of income (that which gives utility) viz. fish and leisure.  The economy is in steady state, with the rate of extraction of fish equal to the rate at which it is consumed.  Growth of population happens over a time scale much larger than the time unit we have chosen (say, a month).

Now we introduce technical change.  Say one guy has an idea (from a dream perhaps) of building a fishing net from the vines of the trees surrounding the tribal settlement.

Now he will have to devote some time while he constructs the fishing net, and will have to be supported while he does so.  This can happen in many ways.

First, he can devote some of his leisure hours to constructing the net, while he still catches his quota of fish for a day.

Second, if all waking hours of the work force are taken up in spear fishing to feed the entire tribe, our net maker can fast for a week while he constructs the net.  This is called “abstinence” by Nassau Senior and other classical economists.

Third, he can be fed by the others in the tribe, while he is constructing the net.  Let us take two cases here:  One, the productivity data is such that all waking hours of the work force are taken up just to produce what the tribe needs to continue its existence and reproduce over time.  Since one guy is dropping out of the workforce, the others will have to make some sacrifice (abstinence) to provide for him while he constructs the net.  Two, there is an increase in production possible if the-work-force-reduced-by-one, works for slightly longer waking hours.  This is a temporary increase in the length of the working day to produce the surplus needed to support our net maker.  Some leisure of the tribe is traded for more fish produced per head of the work force.

Anyhow, however the extra fish are produced, the net maker is allowed to continue with his task of making the net.

He works for a week, at the end of which there is a net.  This is a roundabout means of production.  Time and energy have gone into creating “produced means of production”.  “Produced means of production” in Economics, are also called “Capital”.  Production has become more “capitalistic”.

The tribe discovers that fishing with the net produces more fish per head of the work force.  They can either work less waking hours to remain at the same level of total utility as before when they were spear fishing (and thus enjoy more leisure).  Alternatively, the net maker can say “It was my idea to make the net, and I fasted for it, so all the extra production is mine”.  He gets more fish than he can eat in a day, but it is wasted.

The matter of disposal of the surplus is a tricky one, and will have to wait till another post.

This one was about getting at the meaning of capital.