``I must give him his due. He has considerably cretinized me.'' Lautréamont

Pics click to enlarge.

Monday, January 08, 2007

Joe Economics (NYT)

In the 80s, there was a frost in Brazil, and coffee became scarce.

Yet the shelves had all the coffee you wanted!

It just cost a lot.

``More than the poor could afford.''

Magically, people cut back to just meet the supply. No lines formed. No glut developed.

What does ``can't afford'' mean?

Suppose you give a poor person $10 for a can of coffee as he enters the store.

Does he buy a can of coffee with the $10?

No, he does not. There's other things he prefers to coffee at $10 a can.

Yet he has the $10!

That's what ``can't afford'' means. It means not that he can't obtain it, but that he prefers other things first, at the price at hand.

Likewise when the poor ``can't afford'' health care or anything else.

Final economics lesson : what happens, instead of giving the poor person $10, you hand him a can of coffee?

Then the demand for coffee does not match the supply, and there is a coffee crisis! The poor have no reason to cut back, because their preference for something else gets no foothold.

They must then take the coffee or nothing.

Now think about health care.

The rising cost of coffee is a reminder that fluctuations in commodity prices are not just about oil and violence in the Middle East.

Followers

Blog Archive