Sunday, October 26, 2008

Fish and capitalism; pictures of the Soviet stores

I had the following exchange with somebody today:
— There is a village, in which a rich manufacturer produces 400 fish a month. The population of the village is 1000. The village has closed economy. How many people can afford fish in a free-market system?
— 400.
— Correct. Now, this means that only 40% can afford some product. The mayor of the village wants to make it so that 80% afford it. He can:
a) take money from rich fish producer (in form of taxes) and give it to poor people (in a form of fish assistance),
b) force the fish producer lower prices on fish,
c) force the fish producer pay his workers more, so that they can afford fish,
d) all of the above,
e) give the fish producer a tax cut or a credit.
Your answer?
— Wrong.
— Why?
— Because there is still only 400 fish available in the village per 1000 people. Actually, probably less, because all three measures led fish producer to have less income, so now he can afford to produce only 300 fish for the existing price with existing expenses. Plus, some of the workers probably stole some of the fish to sell on black market for higher price. Plus, fish producer might have reduced the quality of fish to reduce expenses.
— So, how would e) help?
— It would allow fish producer to put money into developing his factory (buying more fish eggs, fish tanks, fish food, hiring more fish workers), thus increasing the amount of fish produced from 400 to 800. This would allow the fish producer to make more money but also lower the prices on fish, making it affordable to 80% of the population, as desired by the mayor.
— But this would increase the unequality between poor people and fish producer.
— So, you’d rather people be equally poor rather than unequally rich?
The above picture comes from this series of really great photos representative of the Soviet era’s efforts in “spreading the wealth”. The comments are in Russian, but pictures speak for themselves. I like this few especially:

(Pork — 1 ruble, 90 kopecks per kilogram. Old ladies cannot believe their eyes. “Butcher, that bastard, sold all the meat on a black market.”)

(“Is there enough?”)

No comments…

To reiterate my earlier point: when an attempt to do good is hijacked by emotional knee-jerk-reflex thinking, it leads to doing evil.

Some remainder of free market in the Soviet Union:

Government-controlled market:

The choice is yours.

1 comment:

Anonymous said...

There are other choises. And economic science has evoluated by integrating sociology. Anyway, the choice is not only between having 500 people ruling the world and 500 people ruling the world.