Population issues and a small island community

To acknowledge the arrival of the seven billionth person on this planet I would like to draw your attention to the chapter on population in Raymond Firth’s anthropology study We, The Tikopia.

Some excerpts from this chapter have been placed elsewhere on this weblog.  Click here to see them.

Tikopia is a small island with about 1,200 people when Firth was there in 1928 and 1929.  His discussion of population illustrates that overpopulation is a very difficult issue with lots of moral dilemmas.

One of the first issues is whether or not overpopulation is a problem for us.  It is much easier to see it as problem on a small island with 1,200 people than it is on a global scale. Is it just a coincidence that the world population has reached seven billion at the same time as young people around the world are protesting their lack of opportunity to enjoy the same standard of living as their parents?

Firth’s book shows how one group of people dealt with the problem and how the arrival of Europeans upset the balance.  What worked for them might not work for the rest of us but we will probably have to deal with similar moral issues.

The final paragraph in this chapter reminds me of my first posting to this blog:  The most evil of all people are those who try to push their relgion, values, morals or sexuality onto others.


Effect of Eurozone deal on money supply

An analysis article on the Guardian website lists six problems facing the Eurozone following the deal in which a pile of Greek debt will written down by 50 percent.

The problem which catches my attention is number five: that Europe’s banks could starve the economy of credit.

Europe’s banks have been told to take a more realistic view of the billions of euros worth of sovereign bonds they hold on their books, and make sure they’re holding enough capital to protect themselves against the risk of default by Greece, Portugal, Spain and Italy. They could do that by raising investment in the financial markets – from cash-rich states such as China, for example – or they could choose instead to repair their balance sheets by reducing their liabilities. That would mean calling in loans and depressing new lending to families and businesses throughout Europe – exactly the credit crunch eurozone politicians are so keen to avoid. Any such lending squeeze would be likely to exacerbate the slowdown that is looming: many economists already expected the European economy to slide into recession in the fourth quarter of the year.

When they talk about credit the really mean money supply.  One of the risks of this deal is that there may be a major reduction in the money supply in Europe and probably around the world.

This is serious. As well as having to cope with a slowdown because we are using resources at an unsustainable rate the economy may further depressed because their will not be enough money supply to facilitate the exchange which is still possible

Oil – lots of profits and high risk

Here’s an article on the oil industry from The Economist which  nicely illustrates the economic principle that price is equal to the marginal cost of the last unit produced.

The big oil companies are raking in the profits from oil fields discovered and developed when costs were lower and for which they now receive the higher prices.   At the same time they feel a need to invest in more difficult to obtain oil in politically unstable parts of the world – a double risk.  As well as risk from political changes there are also risks if the price of oil were to drop making these new sources uneconomic.

If I were the chief executive of one of the big oil companies I would want to consider just taking the profits and forgetting the search for new oil.

Delaying retirement and young people

Statistics Canada reports Canadians are delaying retirement and working later in life.  Presumably this is an attempt to maintain our standard of living into our golden years.

At the same time young people are taking to the streets in frustration at what they see as a lack of opportunity for the same standard of living.

I wonder if the older folks were to retire earlier and accept a slightly lower standard of living, would it provide more opportunities for the younger people?

Inflation – another worry

It appears inflation is something else about which to worry.  Two news items: one reporting a doubling of the money supply in three years and the other reporting an increase in the British inflation rate.

With an increase in the money supply and no corresponding increase in the quantity of goods and services being produced something will have to give –  either the velocity, the rate at which money moves through the economy, will have to go down or prices will have to go up.  There have been some indications banks are holding cash and not making loans and therefore the velocity has probably gone down.  It will not be surprising to also see some inflation happening – maybe a lot.  Inflation is one of the ways in which people can lose their savings.

The mitigating factor is that financial institutions are likely suffer some extensive losses over the European debt crisis.  Because banks are the key factor in creation of the money supply this will work to reduce the money supply.

Money supply is a difficult thing to evaluate as there are number of definitions and velocity is impossible to measure.

I’m wondering if my wife and I should go on a shopping spree and max out our Visa card.

Lobbying and profits

Here’s a news item that American companies spending lots of money on lobbying do rather well.

Of course.  As a general rule economic legislation works to interfere with the competitive features of a market economy.  If there were perfect competition there would be no long-term profits.  Therefore, if you want to make  a profit you lobby the government to ensure if passes legislation restricting competition in your field.

Agricultural surpluses, relationships and Occupy Wall Street

Here is a possible explanation for the Occupy Wall Street protests which are currently happening around the world.

For a relationship to be satisfactory there has to be a more or less equal two-way exchange.

However, there is no law that says relationships have to be satisfactory,  Furthermore, some people take advantage of others by exploiting or coercing them.

How do these observations apply in economics.

Throughout history there has been exploitation of some people by others.  Mostly this has involved agriculture and force.  The surplus has been taken.  Mostly enough has been left for the producers to just subsist.

Starting with the Industrial Revolution three things changed.

First the surplus started increasing so that more could be left for the producers.  Eventually during the recent years of prosperity  the surplus was so large that many people (especially in the industrial countries) could have a nice share of it.

Second, population levels (at least in the industrial countries) have been low relative to the opportunities for employment.  As wages are a function of supply and demand wages have been good and thus the surplus has been shared.

Third, those people who do the exploiting have discovered psychological ways of getting their hands on the riches of the world without using force.  These include legislation which restricts competition,  sneaky marketing, promoting the work ethic and emotional appeals such as to our greed.

To those of us who have been able to share the wealth it has not been clear that we have been exploited.

Once again, things are changing.  There is some evidence we are now using resources at an unsustainable rate and there is now more competition for the surplus.

As the above listed psychological instruments are still working the rich are getting richer, the poor are getting poorer   and the Occupy Wall Street protests are spreading around the world.

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