amusing economic situations to prove a point?

silverharp

I came across this recently as an economic situation to prove / disprove how far you can push an economic theory, in the case below, its about how a lighthouse can be funded. It made me chuckle.

Anyone have any other good/amusing ones?


One important point to make here is that the advance of modern technology makes anarchistic arrangements increasingly feasible. Take, for example, the case of lighthouses, where it is often charged that it is unfeasible for private lighthouse operators to row out to each ship to charge it for use of the light. Apart from the fact that this argument ignores the successful existence of private lighthouses in earlier days, as in England in the eighteenth century, another vital consideration is that modern electronic technology makes charging each ship for the light far more feasible. Thus, the ship would have to have paid for an electronically controlled beam which could then be automatically turned on for those ships which had paid for the service.

Économiste Monétaire

Amusing situations to prove a point? How about Pareto efficiency, theory versus practicality. (For our lurkers who don't understand what this is, a Pareto optimal/efficient solution is one where no action can be taken to make at least one person better off, without making anyone else worse off. This is generally what you should strive for, in theory.)

Consider the following situation: Bob is a dictator and has an insatiable hunger for power. In Economica (our example country) Bob holds nearly all the wealth of the country, and partakes in your ubiquitous dictator-esque actions of torture and plundering of natural resources. The majority of the population are living in poverty, and are on near subsistence wages, after all labour protection laws have been removed due to certain multi-national corporations generously funded Mr. Bob's new yacht. Is this situation a Pareto optimal solution? If you're operating on the goal of achieving Pareto efficiency, should this situation be altered?

Yes, it is a Pareto optimal solution. Why? If the workers were to rise up against Bob and take back their country and implement procedures to better the average persons life, that would still make Bob worse off than the previous situation where he was dictator. Since it makes someone worse off to change the situation, it is considered Pareto optimal.

That's a fairly well know example and can be extended to other situations like monopolies.

silverharp

Économiste Monétaire wrote: »

Amusing situations to prove a point? How about Pareto efficiency, theory versus practicality. (For our lurkers who don't understand what this is, a Pareto optimal/efficient solution is one where no action can be taken to make at least one person better off, without making anyone else worse off. This is generally what you should strive for, in theory.)

good example, A Pareto solution probably seems quite qaint in this day and age.