Line #82 UsefulNotes/Economics


1	Economics is the [[HeinzHybrid bastard lovechild of politics, sociology, psychology, and philosophy on the one hand and mathematics on the other.]]
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3	It is FlameBait incarnate.
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5	This page lists the few points which the widely divergent schools of economic thought can agree upon. Each school starts from a different set of philosophical assumptions, has different goals, and uses different methods. This is one of the myriad reasons why economics is sometimes called "the dismal science". [[note]]The origin of the term is from how during the time of slavery, John Stuart Mill and his fellow economists supported equality between men and the abolition of slavery, and Thomas Carlyle was afraid that economics would lead to the decline of society. [[http://aprendeenlinea.udea.edu.co/revistas/index.php/lecturasdeeconomia/article/viewFile/7874/7415 Source (in Spanish)]][[/note]].
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7	[[UsefulNotes/EconomicTheories A more detailed explanation of general and specific economic theories can be found here.]]
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9	[[foldercontrol]]
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11	[[folder:Core Concepts]]
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13	* '''Good''': A material object that provides some benefit to humans as a result of its inherent physical properties, by satisfying a want or need, or allowing a person or institution to avoid a pain or privation. Goods may be natural or man-made, and may or may not have value. (Air, for example, is a good generally without monetary value, since it is not scarce (unless you're in a dystopian off-world planet where the government or a MegaCorp requires [[{{Paying for air}} paymentfor air]].)
14	* '''Service''': A process that, like a good, provides some benefit to humans as a result of its properties. Goods and services are typically treated interchangeably in economics.
15	* '''Product''': A good or service created by human activity for consumption, trade, or sale. All products have value (otherwise they would not be produced, or would not be used if they were some 'waste product' created in the production of some other product.)
16	* '''Producer''': A person or institution that creates or provides a product.
17	* '''Consumer''': A person or institution that buys a product.
18	* '''Supply''': The availability of products to be purchased or consumed. This includes all elements involved in bringing products to a consumer: raw materials, production capacity, labor, transportation, warehousing, store space, delivery, and payment.
19	* '''Demand''': The desire of consumers within an economy for certain products and ability to pay. To explain the "ability to pay" part, penniless teenagers may lust after a Ferrari, but since they can't afford it, their desire doesn't count as economic demand.
20	* '''Labor''': The human physical and mental effort used in the creation of products.
21	* '''Capital''': The non-labor resources used in the creation of products. Capital may include equipment, buildings, infrastructure, stocks of raw materials used to produce products, and many other things.
22
23	!! Barter, money, and currency
24	* '''Barter''': A system of trade in which products are exchanged in-kind: that is, if you want to obtain a cow or a shoe shine from a person who offers those products, you have to give them another good or service or combination of goods and services in exchange, such as a bushel of wheat or an item of clothing. Barter systems are inefficient for the following reasons:
25	** Barter systems require a 'double coincidence' of wants for trading to occur. If Alice desires a product Bob is offering, to obtain it from Bob, Alice must either have a product Bob wants, must convince Bob he can use a product she is offering (that Bob doesn't want) to obtain something he wants, or must try and make an often tedious and unreliable ChainOfDeals to obtain a product Bob wants.
26	** Barter systems are imprecise. As products are usually indivisible, trades in barter systems usually must be conducted with whole products, forcing traders to often significantly 'round-up' or 'round-down' the value of products.
27	** Barter systems are mentally laborious. They generally require each trade to be mentally evaluated for the value of one product against another. For example, a farmer who grows ten kinds of vegetables and wishes to barter them for eggs, milk and cheese must go through the non-trivial effort of considering 'How many eggs is one carrot worth?' 'How much milk is one head of cabbage worth?' every time a trade with different products is proposed.
28	** Barter systems are physically laborious. Traders in barter systems are generally required to physically carry the goods they wish to trade to the place of exchange.
29	** Barter systems restrict saving. Many goods decay and lose value over time, particularly the relatively primitive goods which tend to be produced by barter societies. Barter systems therefore offer few ways people can easily protect their wealth for the long term, forcing people to focus on the economic short term and continually produce new wealth so they can continue to survive.
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31	All five of these problems are solved with the introduction of '''Money'''.
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33	* '''Money''': A '''medium of exchange'''. Money is any object or concept of value that is independent of the specific product being traded. Rather than trade a cow for a bushel of wheat, you trade the cow for an agreed-upon amount of money, which the seller may then trade to buy a bushel of wheat or a piece of clothing from someone else. The important elements of money are:
34	** Money is valued by a community or society. This value may arise from money being physically made from a valuable material such as precious metal, or it may arise from an official guarantee by an authority that money may be exchanged for something of value, or it may arise from a completely implicit and unofficial understanding among people that money will be accepted as payment for products.
35	** Money is physically convenient. Money is small and light, easy to store or hide, and requires only very minimal physical effort to carry to places of exchange.
36	** Money is fungible within reasonable limits. A given amount of it is as valuable as any other similar amount, regardless of the specific form that amount takes. $10 in paper money is as good as $10 in a bank account or $10 in coins.
37	** Money is divisible within reasonable limits. A buyer is not forced to part with more than the price of a product because the seller is unable to make change, except under unusual circumstances. Diamonds make poor money because splitting them is difficult, doing so reduces their total value, and it's impossible to put them back together again.
38	** Money is durable and not consumable.
39	** Money is scarce. Money should not be something that any person can create more of at any given time; rather, its manufacture is controlled by an authority. (In modern economies, the central bank of a government.)
40	* '''Currency''': The specific form that money takes (dollars, pesos, shekels, gold sovereigns).
41	* '''Commodity currency''': Currency that is exclusively in the form of a valuable good, like gold or silver, or is "backed" by a specific amount of said valuable good. Important to the concept of hard currency is that obtaining more of it is not easy; it must be "mined" or taken from someone else who has it.
42	* '''Fiat currency''': Currency that is not backed by a valuable good, but is rather created ''ex nihilo'' (from nothing) by an issuer. Important to the concept of fiat currency is that its issuer may freely (within practical limits) create or withdraw it from circulation.
43	* '''Common currency''': A currency that is used in free trade (that is, it can be accepted immediately without conversion to a different currency) within a particular economic zone. The U.S. is such a zone, with the dollar acting as the common currency for the various states. The Eurozone is also such a zone, with the euro as its common currency.
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45	[[/folder]]
46
47	[[folder:Value]]
48
49	! The Two Definitions of Value
50
51	If the average person with no training in economics is asked what the word "value" means, they would probably say something along the lines of “value is how much something is worth.” But what does it mean for a thing to be “worth” something? This is not so trivial a question as it might appear. When we say something is “worth” something, there are two ''fundamentally differently concepts'' we might mean, which must be very carefully separated and rigorously defined before they can be properly understood. These two concepts are '''Objective Value''' and '''Subjective Value.'''\
52	'''Objective Value''' is '''the objective capacity of an asset to achieve a result.''' If Alice has $20.00, there is no question that she can buy twenty candy bars that cost a total of $1.00 each, or four hamburgers that cost a total of $5.00 each. This ability of the $20.00 to be exchanged for twenty candy bars or four hamburgers is ''objective''. Anybody in the world holding the same $20.00 (and no other money) in the same place has the same ability to buy the same products. Additionally, there is no question that $25.00 has more objective value. $25.00 has a greater capacity to achieve a result – in this case, the capacity to buy more candy bars or more hamburgers. Objective values are very easily understood and compared: Ten pounds of rice can feed more people than seven pounds. 500 kilowatt-hours of electricity can power a machine longer than 200 kilowatt-hours. In terms of objective value, $20.00 is $20.00 is $20.00, for everyone. It should be immediately clear that the total objective value of all the wealth in the world cannot be increased through exchange, only through production.\
53	'''Subjective Value''' is defined as '''the importance of an asset to a person's economic condition.''' As the name indicates, different people place tremendously different subjective values on goods with identical objective values. As '''the importance of an asset to a person's economic condition''', subjective value is ''defined'' as the value that people care about. It is ''by definition'' the quality which people and institutions generally base their economic decisions upon. Subjective value is therefore the ''true'' value, and will henceforth be referred to simply as “value.” Because assets can and do increase or decrease in value as they are exchanged, the total value of all the wealth in the world is dramatically altered through exchange.\
54	Value is at the fundamental core of (nearly) all economic phenomena. ''Why'' do we build economic systems? ''Why'' do people produce things, and buy things, and sell things? ''Why'' do we go through the (often considerable) time and effort to go to stores, to compare prices, to think about what we should purchase?\
55	'''People participate in economic activity to increase the value of their economic condition.''' Humans, as rational beings, want good things and try to avoid bad things. We want tomorrow to be better than yesterday. Seeking value is a ''fundamental component'' of rationality. This is a quality of humans that is independent of the government and laws we live under, the society and culture around us, and the technology we have access to. It is this principle that guides 99% of economic phenomena. We produce things, buy things, and sell things to have ''more'' value afterwards than we did beforehand. Much as ideas such as the conservation of energy are guiding principles in understanding systems of physics, this idea – that people seek value – is the guiding principle that forms the foundation of economic science.\
56	What is meant by "economic condition"? Simply put, it is everything in a person's life that can be influenced by economic actions. Most obvious is a person's wealth, but this also includes things like a person's physical health, legal status, education, and life experiences. It is ''not'' at all true that a rational person will generally seek to always increase his wealth. Such a person would rarely or never pay for medical care, for legal assistance, or for that matter, any kind of fun or pleasurable experiences. Instead, people seek to increase the value of their ''economic condition.''\
57	Let us consider a practical example: Alice goes into a supermarket and buys a load of bread for $1.00. Does Alice value this loaf of the bread at $1.00?\
58	'''No.''' For this transaction to be worth making, the value of the bread to Alice must be ''more'' than the value of the $1.00. Otherwise, Alice would not be benefiting, and would almost certainly not agree to the exchange. Prices of purchased items are, in general, ''never'' equal to the value placed upon the item by the buyer or seller. The buyer of a purchased item must value the item at ''more'' than the price for the transaction to be worthwhile. Likewise, the seller of a purchased item must value the item at ''less'' than the price for the transaction to be worthwhile.\
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60	Bob is thirsty. He goes into a convenience store and buys a cold water of bottle. He drinks it, and very briefly considers buying another, but decides not to.\
61	''Why?'' ''Why'' was this a worthwhile transaction for Bob three minutes ago, but not now? The exact same product is available – the same cold bottle of water – for the exact same price. The objective value of the bottle of water and the money used to buy it are the same. The answer is that the value Bob places on the second bottle of water is lower than the value he placed on the first bottle and now lower than the value of the money he would need to use in order to pay for it. The value we place upon products is constantly changing. (Particularly the value of products that only satisfy us for a short time, such as food and drink)\
62	There are obvious and significant exceptions to this principle of seeking higher value. People can and often do make decisions that decrease the value of their economic condition based on love, friendship, charity, or custom. Nevertheless, these interactions form only a small minority of the economy.\
63
64	! The Determination of Value
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66	When early economic thinkers considered the different value of various goods, they noted that the most obvious property separating goods from one another was '''Usefulness.''' '''Usefulness''' is defined as '''the capacity of an asset to provide a benefit.''' Take a moment to understand and appreciate the word '''capacity.''' Clean water has the ''capacity'' to keep us alive. Without it, all humans will very quickly die, and clean water therefore has tremendous usefulness. But note that clean water only has the ''capacity'' to provide this benefit, and the vast majority of water is used for other purposes.\
67	If we’re trying to find a connection between the great differences in usefulness of different goods and the great differences in value, the most reasonable hypothesis to test is to see whether more useful goods are more valuable. This sounds very reasonable at first glance: A good with a higher capacity to provide a benefit to humans will be valued more.\
68	However, a great paradox immediately become apparent. This quick assumption was largely the exact ''opposite'' of the evidence observed. Air and water, which have a tremendously high usefulness in their ability to sustain human life, have extremely low or zero value. Materials like wheat and iron, which are very useful but not immediately crucial to human life, have a moderate value. And diamonds, which, in comparison to iron and water have only a very small usefulness, have a very high value.\
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70	!! The Labor Theory of Value
71
72	Various theories arose to propose solutions to this ‘Paradox of Value,’ by far the most successful of which was the Labor Theory of Value (LTV), as advocated by classical economists such as Adam Smith and Karl Marx. The Labor Theory of Value states that '''the value of a good or service is determined by the average amount of socially necessary labor required to produce it.''' This includes both the ‘living labor’ used in the immediate production of a product as well as the ‘dead labor’ used in the production of the raw materials and capital. According to the LTV, water generally requires very little labor, and therefore has a very low value. Wheat and iron require more labor to produce and have a therefore higher value. Diamonds require a great amount of labor to mine, and therefore have a very high value. As the technology of a production process improves, less and less labor is required to produce each unit of a product, and the value of the product falls.\
73	To avoid making strawmen arguments against the LTV, it’s worth taking a moment to consider what it ''doesn’t'' mean:
74	* The Labor Theory of Value does not mean that it’s impossible for ''some'' high value goods to be produced in certain circumstances with very little labor. The LTV predicts that value is dependent only on the ''average'' labor required to produce a product. Finding a diamond on the road, for example, does not invalidate the LTV, because although this ''one'' diamond was very easily produced, most diamonds still require a great amount of labor.
75	* The LTV does not mean that goods become more valuable if individual workers are slower or less skilled. Again, the LTV only considers the average skill and dedication of the workforce, which can vary based on things like culture, law, and the health and education of the population.
76	* The LTV only predicts that labor creates value in the production of goods (that is, material objects with usefulness) or services. Labor that creates objects with no usefulness or that creates nothing at all (such as labor to dig holes and fill them up again) does not create any value.
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78	However, there are many economic phenomena that the LTV fails to predict. Of note:
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80	* The LTV predicts land has no value. The LTV therefore does not explain the phenomenon of rent or land purchases.
81	* The LTV fails to explain the phenomenon of interest. (''Some'' amount of accounting and clerical labor is of course necessary to process loans and other investments, but this is vastly disproportionate to the millions or even billions of dollars interest very large investments can generate.)
82	* The LTV does not explain the value of untouched natural resources, or the value of commodities whose production is limited by a lack of necessary natural resources.
83	* The LTV does not predict the value of certain products that require little labor, such as wine aging to become more valuable, or a field of planted saplings maturing into a forest on its own.
84	* The LTV does not explain the value of unique items, such as art or antiques.
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86	Additionally, the LTV is only concerned with whether the usefulness of an object exists in ''any'' amount. Labor used to create a useless object creates no value, but as long as an object has some usefulness, the amount – whether vast or tiny – is completely irrelevant to the LTV. Economists could not shake the feeling that the incredible differences in usefulness between different kinds of goods should play ''some'' role in the determination of value. While the LTV enjoyed widespread acceptance, a nagging belief persisted that some fundamental piece of the puzzle was still missing. The key to this puzzle was the realization of another fundamental human behavior:
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88	!! The Marginal Theory of Value
89
90	'''Humans always prioritize wealth to its most important and urgent uses.''' And ''because'' wealth is prioritized to different purposes that provide extremely different benefits, assets with identical objective values have extremely different values.\
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92	The economist Böhn-Bawerk gives us this example: Suppose a man lives alone in the forest, far from civilization and is therefore unable to trade and completely self-reliant. The man has harvested five large identical sacks of wheat. The first sack of wheat will allow him to make enough bread to keep himself alive. The second sack allows him to make all the bread he wants. He uses the third sack to feed his animals. The fourth sack is used to make whiskey. And because he cannot think of anything better to do with the fifth sack, he uses it to feed to the birds. What is the value of each sack of wheat?\
93	We have previously defined value as '''the importance of an asset to a person’s economic condition.''' What is the importance of the fifth sack of wheat to the man – or in other words, what benefit does it bring him? It brings him the pleasure of feeding the birds. Why? ''Because'' humans always prioritize their wealth to its most important and urgent uses. If the man loses one sack of wheat, he will not give up the bread he needs to survive, feed for his animals, or whiskey. He will always prioritize the remaining four sacks to their most important and urgent uses and give up the ''least'' valuable use of the wheat. This least valuable use of one sack of wheat – feeding the birds – is the real and material gain of having five sacks of wheat instead of four, or the real and material loss of having four sacks of wheat instead of five. It is therefore the ''value'' of the fifth sack of wheat.\
94	Likewise, if the man has only four sacks of wheat, what benefit does the fourth sack provide him and therefore what value does it have to him? Again, if the man loses one sack of wheat, he will not give up the bread he eats or feed for his animals. He will always give up the ''least'' valuable use of the wheat. This least valuable use of one sack of wheat – making whiskey – is the real and material gain of having four sacks of wheat instead of three, or the real and material loss of having three sacks of wheat instead of four. It is therefore the ''value'' of the fourth sack of wheat. And now we see that despite being physically identical – despite having ''identical objective values'' – sacks of wheat have greater value as they become scarcer, ''because'' they are prioritized towards progressively more important and urgent uses.\
95	Finally, let us the consider the state of the man when he only has one sack of wheat. This is the wheat he uses to keep himself alive. Now, this asset is prioritized towards the most important and urgent use of all – survival. The difference between this one sack of wheat and nothing is the difference between life and death, and therefore this one sack is worth the man’s life.\
96	Let’s look at another example, with money:
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98	* Alice is very poor, with an income of $20.00 per day. How does she use this income? To receive the most benefit from it, she prioritizes it towards her most important and urgent wants. In this case, food to survive, whatever extremely basic shelter she can afford, and a small number of personal items. This $20.00 per day has an extremely high value to Alice. If she cannot rely on charity, ''all'' of her daily income is a matter of life and death.
99	* Bob has an income of $150.00 per day. He is not rich but is able to comfortably afford all the necessities of life. What value does he place on the same $20.00 per day? Like Alice, he prioritizes it towards his most important and urgent wants. The difference is, Bob has another $130.00 per day to prioritize towards food, an apartment, transportation, utilities, medical care, saving for the future, and various other expenses. This remaining $20.00 is therefore used for significant, but ultimately non-essential expenses. Bob will therefore place a moderate value on this $20.00 per day. He might use this income to pay for meals at restaurants, to pay for a nicer apartment, or to save up for a vacation. Losing $20.00 per day of income would be a serious setback, but not life-threatening.
100	* Finally, Charlie has an income of $5,000 per day. He has another $4,980 per day to prioritize towards his needs and wants, and uses it to afford multiple houses, opulent vacations, meals at the most expensive restaurants, and other luxuries. What benefit does this $20.00 per day provide (and therefore, what value does Charlie place on it?) The answer is clear: ''almost none''. Charlie already has $4,980 a day to satisfy effectively every material need and desire. The only priorities left unsatisfied are extremely trifling and indulgent.
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102	The value of an asset is therefore always equal to the benefit derived from its ''least'' useful application. In other words, as wealth grows, each new unit of wealth is successively less and less valuable ''because'' it is prioritized to successively less and less beneficial applications.\
103	Note that this is by no means restricted merely to personal applications. For example, consider a man who owns a truck full of diamonds. One small spoonful of diamonds is enough to satisfy all the man’s desire for personal jewelry and decoration. Does this mean the rest of the diamonds have no beneficial application and are therefore worthless? Not in the slightest, because he can sell those diamonds and use the money for some application he does find beneficial.\
104	Here we have the resolution to the apparent paradox: It is not that water is more valuable than diamonds. Indeed, a person with a choice between all the water he wants but never having a diamond, or all the diamonds he wants but never having a drop of water ''would'' of course choose water. It is that ''one more'' diamond is more valuable than ''one more'' unit of water. Water is plentiful, so we already have plenty of water to prioritize towards our most important and urgent needs: Water for drinking, water for washing and cleaning, water for agriculture and industry. We have only very trivial or nonexistent wants left that can be satisfied with ''more'' water, so the value is therefore very low. Conversely, although the usefulness of diamonds is low, the supply of diamonds is scare enough that even these uses of highest priority are not always satisfied, so the value is high. Finally, a man walking in the desert miles from civilization and dying of thirst with no water and no diamonds will understand that the most urgent and important need one unit of water will satisfy (survival) is more important than the most urgent and important need one diamond will satisfy, and will choose a bottle of water over a diamond.\
105	Value arises when the supply of useful assets is too scarce to satisfy ''every'' possible desire. As long as there are more assets than necessary to satisfy every possible desire, assets have no value, because if one unit is lost, it can be replaced from the excess stock without any desire going unsatisfied. When the supply of an asset cannot satisfy every possible desire, the asset acquires value, because the loss of each unit of asset means some desire must go unsatisfied. Value is ''determined'' by two things: The usefulness of an asset, or, alternatively, how strongly the asset is ''demanded,'' and the scarcity of the asset, or, alternatively, how well the asset is ''supplied.'' Sound familiar?\
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107	A consequence of value is that loss aversion in general is a ''completely rational'' and ''intelligent'' behavior. Rational agents ''will'' be more cautious about a possibility of a loss in objective value than they are excited about an equal possibility of winning an equal gain in objective value precisely ''because'' the value they stand to lose is greater than the value they stand to gain. It must be understood that this concept of value and the actions resulting from it have nothing whatsoever to do with human emotion, willpower, biases, or customs. The higher value of scarce goods is the result of a completely real and material higher benefit these goods provide.\
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109	Since its introduction in the late 19th century, this ‘Marginal Theory of Value’ has gained near universal acceptance among economists as the true explanation of value, marking the end of Classical Economics and the emergence of Neoclassical Economics. A very notable exception is Marxists, who generally reject Marginalism in favor of the Labor Theory of Value. This is because the LTV is at the core of the Marxist theory of exploitation, which in turn is the most central Marxist criticism against capitalism.
110	[[/folder]]
111
112	[[folder:Further Definitions]]
113
114	!! Wages, income, and debt instruments
115	* '''Wages''': Money (or products) paid in exchange for labor.
116	* '''Income''': Money (or products) acquired through wages, selling products, interest, transfer payments, estates, gifts, etc.
117	* '''Spending''': Money that is used to buy products (including labor).
118	* '''Savings''': Money that is set aside for future use, usually by depositing it in a bank or buying an investment instrument.
119	* '''Deposits''': Savings that take the form of a loan to a banking institution.
120	* '''Investment''': Saved money that is loaned to enable the borrower to purchase capital.
121	* '''Debt''': Money or products owed to another.
122	* '''Loan''': A debt incurred with a formal promise of repayment and at a defined interest rate.
123	* '''Collateral''': An asset that guarantees the value of a loan. If the loan defaults, the creditor seizes the asset.
124	* '''Principal''': The base amount of money lent, not counting fees and interest.
125	* '''Interest''': On a loan, the amount in excess of principal paid back to the lender; used as an incentive to lend that money rather than hold it.
126	* '''Credit''': The total amount of loaned money available for a borrower to access. To purchase something "on credit" is to increase one's debt rather than pay cash for a product.
127	* '''Default''': To renege on a debt obligation.
128	* '''Tax''': Money collected by a government that is not in direct payment for a product nor in the form of a bond purchase. Taxes may be used to fund public spending or to pay back public debt.
129	* '''Asset''': A thing of value that is owned. An asset can be money, debts owed to you, capital, property, or any thing of tangible value.
130	* '''Liability''': A thing of value that is owed to another entity, which you are obligated to make good on at some point in time. A liability can be a debt that you owe, a tax bill, a bond that you issued, etc.
131	* '''Net worth''': The sum total of assets and liabilities of any entity.
132	* '''Liquidity''': The availability of an asset for immediate use as money. A '''liquid asset''' is one that can be converted to money easily (or is itself money). An '''illiquid''' asset is one that cannot readily be converted to money. Money in the common currency where you are is more liquid than money in a different currency.
133	* '''Bankrupt''': The condition of an entity whose liquid assets are insufficient to pay back its liabilities.
134	* '''Stock''': A financial instrument issued by a company that represents a share of ownership of that company. Stocks are generally liquid.
135	* '''Debt instrument''': A unit of debt issued by an entity, with specific rules about how it matures (becomes due for payment) and bears interest. The longer the maturity period, the less liquid a debt instrument is.
136	* '''Bond''': A debt instrument, denominated in a common currency, that is issued by a business or government entity. Bonds are generally illiquid.
137	* '''Derivative''': A debt instrument whose value is based on the value of other debt instruments. For example, you may take out a loan on the basis of money you will be paid when a debt that you are holding matures.
138
139	!! Macroeconomic concepts
140	* '''Inflation''': A general increase in prices for products and/or labor. Inflation tends to increase the value of present spending and decrease the value of debt because a given amount of money (spent or owed) will be worth less in the future.
141	* '''Deflation''': A general decrease in prices for products and/or labor. Deflation tends to decrease the value of present spending and increase the value of debt because a given amount of money (spent or owed) will be worth more in the future.
142	* '''"Real" money''': Money adjusted for inflation and/or deflation. This concept is used to meaningfully compare economic output, wages, and other measurements over a period of time.
143	* '''Surplus''': Income in excess of spending. By definition, a surplus is saved. In macroeconomic terms, paying down debt is a form of saving.
144	* '''Deficit''': Spending in excess of income. A deficit that is not taken from savings is borrowed.
145	* '''Boom''': A period of above-normal economic output as measured against a general trend.
146	* '''Recession''': A period of below-normal economic output as measured against a general trend. Formally, a recession is defined as three or more consecutive quarters of below-zero GDP growth.
147	* '''Depression''': An acute period of intensely poor economic output, characterized by significant social and political disruption.
148	* '''Stagnation''': A period, often prolonged, when the trend of economic output shows little or no real growth (adjusted for inflation).
149	* '''Public''': Referring to economic activity undertaken by a governing body or central bank.
150	* '''Private''': Referring to economic activity undertaken by individuals and businesses within a political entity, except that performed by government.
151	* '''Trade''': In macroeconomic terms, referring to economic activity occurring between one political entity and another. Example: foreign trade.
152	* '''Public debt''': The sum total of debt instruments (other than currency) issued by a political entity.
153	* '''Austerity''': A deliberate, temporary reduction in net spending within a sector of an economy or an economy as a whole. Typically applied mainly to public spending.
154	* '''Stimulus''': A deliberate, temporary increase in public spending intended to boost economic output.
155	* '''Economic output''': Often termed '''GDP''', for Gross Domestic Product, this is the sum total of products that a nation as a whole sells, measured in a currency.
156	** GDP can be expressed as a formula: private spending + public spending + trade income = GDP. Alternatively, private surplus/deficit + public surplus/deficit + trade surplus/deficit = 0.
157
158	!! Markets and labor
159	* '''Productivity''': The amount of useful work done per unit of labor.
160	* '''Division of Labor''': The idea that workers increase overall productivity by specializing in tasks.
161	* '''Free markets''': (aka '''laissez-faire''') Markets which are relatively unconstrained by government regulation.
162	* '''Socialized markets''': Markets which are to some extent operated by government, yet are allowed to set prices based on supply and demand.
163	* '''Planned economy''': Markets in which both production and prices are controlled by a central authority.
164
165	!! Government and Banking
166	* '''Bank''': An institution that accepts deposits (saved money), pools those deposits, and then loans them to generate interest income.
167	** '''Central Bank''': A bank, typically government-run, that both issues currency and acts as a depository/lending institution for other banks.
168	** '''Consumer Bank''': A bank that accepts consumer deposits and provides loans directly to consumers.
169	** '''Investment Bank''': A bank that uses its deposits to purchase stocks and other non-bond financial instruments.
170	* '''Regulations''': Rules that a governing body enacts to control private activity. For purposes of this discussion, regulations set limits on the behavior of economic actors such as banks and stock traders.
171	* '''Shadow Banking''': Used pejoratively to refer to investment banking activity that occurs outside the purview of government regulation.
172	* '''Debt ceiling''': An arbitrary, typically legislative, limit on a government's ability to issue debt instruments.
173	* '''Fiscal policy''': Government actions which directly modify economic output, such as increasing or reducing spending or taxes.
174	* '''Monetary policy''': Government actions which affect the relative value of money or the total amount of currency in circulation, such as adjusting interest rates.
175
176	!! Social concepts
177	* '''Minimum wage''': A wage that a political entity sets as the least that an employer may pay to an employee, usually expressed as an hourly amount.
178	* '''Living wage''': A dynamically calculated value representing the wage required for an individual or family to maintain a nominal standard of living.
179	* '''Poverty''': A condition in which an individual or family's income does not allow for purchase of necessities such as food, housing, transportation, etc.
180	* '''Transfer payment''': A payment made, either in cash or products, to lower-income persons, paid for with taxes on higher-income persons.
181	* '''Welfare''': Money allocated by a government to increase the income of individuals or families in poverty.
182	* '''Social Security''': Money allocated by a government to supplement the income of retirees. (Social Security is the colloquial name of this program in the U.S.; other countries may refer to it differently.)
183	[[/folder]]
184
185
186	[[folder:General Economic Fallacies]]
187	'''The following fallacies are only fallacies if:'''
188	* '''The economy is healthy.'''
189	* '''A thing is only 'worth' what its purchaser will pay for it.''' [[note]] such fallacies are based on Neoclassical economics, which is a broad designation that refers to all economic schools that accept the consensus formed in the wake of the "[[http://en.wikipedia.org/wiki/Marginalism Marginalist]] Revolution" caused by the work of Leon Walras, William Jevons and Carl Menger. Basically, this approach to economics emphasizes economic subjectivism; the belief that a good is valued by a subject and that market prices for a good only come about when subjects desire them. This is a great contrast to the Classical economists like Adam Smith and Karl Marx, who argued the value of commodities are related to the labor to produce them (the [[http://en.wikipedia.org/wiki/Labour_theory_of_value labor theory of value]], a theory derived from the philosophy of John Locke). [[/note]]
190
191	The Fallacies.
192
193	# '''The Broken Window Fallacy aka. Destruction Equals Employment aka. Digging and Filling Ditches''': [[TropeNamer Named]] [[http://en.wikipedia.org/wiki/Parable_of_the_broken_window by Frederic Bastiat]]. Keynesians note that "demand-side" recessions caused by insufficient consumption (such as the Great Depression of '29 and Great Recession of '08) can be fixed by putting money in the hands of people who will spend it upon goods and services. While giving them this money for free or in payment for useless tasks (breaking and fixing windows, etc) might be necessary in a demand-side recession/depression, paying people for useless work once the economy was healthy again would be wasteful. This is because those people could be doing useful work instead. In economics terms we would say that the "opportunity cost" of wasteful work in a healthy economy is the useful work that cannot be done instead: an ''economy'' is the allocation of scarce resources. If you are allocating them to repair, you are not ''creating new things'', which is a requirement for a consumerist economy (which ''consumes'' things). On a related note, repairing broken things might be good for the repairman and the businesses that support the repairman, but it isn't good for the people who can't work without the thing that is down for repairs or the businesses that support or are supported by those people, which are frequently more valuable overall.
194	# '''Fallacy of Intrinsic Economic Value aka. MoneyForNothing aka. Superiority Equals Success aka. Wealth Is Zero Sum''': This fallacy consists of forgetting that the "value" of things is relative and determined by how much (if at all) people want it, rather than being absolute and independent of human desire. Examples include:
195	** ''MoneyForNothing'': Creating more money ''cannot'' create "more wealth". It does create inflation. [[note]] Printing money can in the ''short term'' (i.e. before the inflation kicks in) give the issuer some extra wealth; but as time goes on the effect becomes a wealth-transfer from the holders to the issuers of the currency; holders are left with WorthlessYellowRocks.\
196	Though one reason why this one is so persistent is that discovery of new gold mines has often heralded economic booms. This is not because it was intrinsically valuable, though; it was because either the money supply was insufficient to maintain a larger economy, or the country with the gold mines was made better off at the cost of its neighbors.[[/note]]
197	** ''Wealth Is Zero Sum'': This fallacy alleges that someone can only get wealthy by making someone else poor. X's gain must be Y's loss. It's a dog-eat-dog world and business consists of grabbing the largest share of the pie one can. The fallacy is the belief that the "pie" is a fixed size. If economic value is objective, then it is finite; it cannot be created. However, that premise is wrong; economic value is subjective. Thus, the pie size can be increased by increasing the supply of subjectively-valued goods. Technological progress is a large contributor to this.
198	# '''Exporting Good, Importing Bad:''' It's usually used something like this: Exporting something makes others dependent; this is ''good''. Importing things makes you dependent; this is ''bad''. Note that there was an early economic theory, mercantilism, which taught this exactly. And in fact it is still taught in many business and economics classes, or at least implied by referring to a situation where a country imports more than exports as a "trade deficit" and the inverse as a "surplus". In truth, some countries have a relative productive advantage in some areas, while other countries have different relative productive advantages. Trade allows countries to specialize in whatever production they have an advantage in, thus producing more in total, and then trade with each other. This makes both countries better off. For example, perhaps Country A can produce 4 cans of butter, or 2 cans of butter and 1 carton of eggs, or 2 cartons of eggs. Country B can produce 4 cartons of eggs, or 2 cartons of eggs and 1 can of butter, or 2 cans of butter. With trade, they can produce at their advantages of 4 cans of butter in A and 4 cartons of eggs in B and then trade so they each have 2 cartons and 2 cans. Making them both better off than if they produced everything in their own country.
199	** It's worth noting that in an [[TheEmpire Empire]] that has expanded sufficiently the Mercantile system makes more sense (although probably still isn't optimal) ''from the perspective of enhancing state power'' (because state power is relative to other states, and by engaging in mercantilism you are [[TakingYouWithMe potentially harming other states more than yourself]]). However, in terms of delivering an ''economically optimal'' outcome (i.e. maximizing utility), the Mercantile system still Fails Economics Forever.
200	** ''In theory'', Empires can benefit from mercantilism. In practice, of course, this was often not the case. The late 19th century European empires all spent far more maintaining their empires than they got back in revenue, and the colonies themselves represented a very small fraction of their overall GDP.
201	*** Generally, mercantilism makes sense only when governments need money to fight foreign wars, to buy supplies from the locals.
202	** Some economists (e.g. Ha-Joon Chang) consider avoiding imports extremely important when the economy of a country is still developing. If country A currently produces 4 cans of butter and country B can't produce any butter at all, but could potentially produce at least 4 cans, country B should limit the importation of butter from country A to encourage the development of the local butter industry. In the modern world this applies most strongly to third world countries, which are dependent on imports in nearly all sectors of economy and have a very limited selection of exports. That is, ''real'' protectionism is about either having certain production at all or ''balancing'' import and export. So the export may be seen as a problem too[[note]]Aristocratic slavers export wood and rope until the rest of economy is crippled?[[/note]]
203	** Most of the arguments about promoting exports and avoiding imports for developing countries center around the idea that a country needs to industrialize to be truly prosperous, and the best way to do that is to promote local industries by limiting foreign competition. It seems to work with [[http://en.wikipedia.org/wiki/Export-oriented_industrialization Export-Led Industrialization]], but not so much with [[http://en.wikipedia.org/wiki/Import_substitution_industrialization Import Substitution Industrialization]], although obviously this is a major simplification of the internal economic processes of each country that tried these policies. In any case, it's no surprise that countries very much want to have a productive advantage in advanced technological industries and not, say... drugs, prostitution, and making sneakers for three cents an hour.
204	** It's also worth noting that importing and exporting will always balance in the long-run. If the US buys stuff from China, but doesn't sell anything, China will have a bunch of dollars that are worthless to them; unless China start buying stuff from the US, or loan the money back to them, or something else to that effect. If both countries use the same currency, this won't happen as quickly, but in this example, the currency would slowly get more valuable in the US and less in China, until the trade balances.
205	# '''RidiculousFutureInflation:''' The main problem with this is that it is often portrayed as being a natural and normal result without any of the many social and economic problems hyperinflation shows in the real world. It is, however, normal to see drastically inflated prices as a result of a ''past'' inflation.
206	# '''The resource halt''': A source of conflict in many post-apocalyptic scenarios is the sudden exhaustion of a valuable natural resource such as [[PostPeakOil oil and the conflicts that inevitably flow from it.]] Any microeconomics principles student will tell you that the real world does not work this way. If mankind is faced with such a threat, owners of the resource will withhold some of their stockpiles now in order to take advantage of the future scarcity. Furthermore this will mean that the price of the resource will rise slowly, giving humanity time to adapt. As a result, the point where we do run out will not be a trigger for a massive calamity, rather it will hardly be noticed.
207	** This would presume that the progress of science, and, indeed, the circumstances of the physical world itself, are determined by economic demand; events may very well occur to which humanity is simply unable to adapt. Furthermore, if the resource is sufficiently important - for example, water - the tactic of stockpiling may backfire by way of having your throat cut by a thirsty mob.
208	** A sudden, temporary decrease in ''availability'', however, can be entirely plausible. This can occur (and has occurred) due to the obstruction of transportation routes, the destruction of the production apparatus, or monopoly/oligopoly producers artificially withholding supply in order to serve other motives. The effects of these scenarios are likely to be tied to relatively specific times and places rather than being TheEndOfTheWorldAsWeKnowIt (although it may feel that way to those affected).
209	** Also as the price rises former non-profitable actions have to be reconsidered - they might generate a profit now. Case in point - the Bakken formation in [[UsefulNotes/TheSeveralStates western North Dakota]] is currently undergoing a huge oil boom because of both technologic advances and rising oil prices making it very profitable to drill there now; not ten years ago North Dakota was losing population like much of the Great Plains. The same is true of most natural resources: they are extracted only when it's profitable to do so. If a gold mine gets an ounce of gold for $100 worth of effort, and gold is worth $110 an ounce, then it's profitable and the mine operates. If it takes $150 worth of effort, then the mine is "mothballed" and mining stops until the price of gold goes up, likely due to scarcity. This is actually one reason of many for why oil hasn't suddenly dried up: when it's gushing out of the ground, it's cheap, and the harder-to-reach sources are left alone. When it becomes more costly to extract everywhere and the price goes up, those harder-to-reach sources suddenly beckon when their costs become less than the potential profit.
210	** Finally, as a resource becomes less available to meet demand, the incentives to develop replacements rises. Furthermore, science reveals new methods to replace those resources over time, and demand for replacements can lead to the necessary R&D to make those replacements more efficient. Fossil fuels serve as an excellent example. Humans don't necessarily want oil and coal; we want warm houses, the power to move our vehicles, lubricants, plastics, and other products that are based on fossil fuels. As the costs - including pollution, environmental damage, and moral concerns - of these fuels rise, the incentive to meet those needs in other manners rises. Note the recent decline in [[https://data.worldbank.org/indicator/EG.USE.PCAP.KG.OE?locations=1W-XD energy usage per capita]] in free market industrialized countries; and, in particular, the decline in [[https://data.worldbank.org/indicator/EG.USE.COMM.GD.PP.KD?locations=1W-XD-XT-XP-XM energy usage per dollar of value produced.]]
211	# '''America the bankrupt''': National debts don't work like your personal debt. For example, people don't buy your debt to prop up your currency. Yet for some reason a lot of writers tend to think of the national debt in the same terms as a bank loan, with angry creditors and everything. When this trope is invoked expect to see a consortium of angry foreign dignitaries banging on a conference table that they want their money back. In reality, if countries actually acted like this, the global financial system would probably collapse pretty spectacularly and everyone would be screwed. This trope is not specific to America, but for some reason Americans are exceptionally paranoid about the National Debt, particularly when [[ChinaTakesOverTheWorld the Chinese are buying it up]], and now not buying it anymore. [[https://web.archive.org/web/20171114015944/https://kathylien.com/forex-blog/which-countries-have-the-most-debt Oddly enough, America's National Debt isn't even that bad by international standards]]. Also, the US national debt is in terms of dollars, and the government can create as many dollars as they need to pay off the debt. Everyone would be paid the amount owed, but the new dollars would soon lead to inflation.
212	** The key here is that governments usually owe substantial portions of their debt to '''themselves''', i.e. either the government owes money to different branches, or those branches hold their assets as bonds and treasury bills instead of money; by owing money to yourself, you usually don't charge yourself interest (beyond inflation) and you theoretically can't default on money you owe yourself. This is how Japan can have gross debt worth over 100% of their yearly economic output and have little economic effects: 70-80% of its debt is owned by the Japanese Central Bank. In the United States, around 35-40% of the government debt is owed to itself, mainly to the Social Security Administration. Also, debt owed to foreign entities makes up MUCH less of the debt than people seem to think: as an example, China owns only 6% of the total US debt.
213	** There have been cases in history where creditor nations have launched military actions of debtor nations in order to force repayment - the most well-known is the occupation of the Ruhr in 1923 by France and Belgium after UsefulNotes/WeimarRepublic Germany had repeatedly defaulted on its (huge) debt obligations to the Allied Powers under the terms of the Treaty of Versailles (France believed Germany was testing Allied resolve to enforce the Treaty by skirting the payments). It ended poorly for the French, as they got cast as the bad guy internationally (despite the occupation being legal under Versailles) while Germany got sympathy once the passive resistance campaign against the occupation in the Ruhr started. Other cases include the Anglo-Egyptian War of 1882, the United States' occupation of Haiti in 1915, and the proposed joint Anglo-French-Spanish expedition to Mexico in 1861 (Britain and Spain backed out and made separate deals with Mexico when it became clear Napoleon III had more on his mind than just recovering the debt it was owed). In all these cases, forcing repayment of debt was a more secondary reason to exercising hard power (which may explain the acute American paranoia over this trope, however infeasible it would be in practice).
214	*** Needless to say, there's one flaw in this potential concern: The fact that the United States is, by far, the most militarily powerful nation on Earth.
215	# '''Third World Countries: Paradise of rich nations' investments''': Ah... Third World Countries, with their cheap labor supply, sometimes lax regulations, and prime materials just waiting to get exploited. With such advantages, wouldn't the average Joe invest his life savings into opening a business in say... Somalia? As you probably answered... not so, normally, the reason labor is cheap in [=TWC=]s is because the workforce is also unskilled, lax regulations also usually mean a high crime rate or even political instability. In other words, they do not guarantee property rights. That's why it's usually the big businesses that take the plunge to do the tremendous investments in [=TWC=]s, since they can absorb the cost of giving training to the workforce and providing security for their investments. Even then, a great number of third world countries (especially in Africa and South Asia) are practically repellent to foreign investment even by by big businesses, because contrary to the popular belief, third world countries tend to have enormously ''more'' regulations than first world ones (which is part of why they're third world in the first place). [[https://en.wikipedia.org/wiki/List_of_countries_by_economic_freedom#/media/File:Index_of_Economic_Freedom_2018.png Note the Economic Freedom Index]] and the World Bank's [[https://data.worldbank.org/indicator/IC.BUS.EASE.XQ ease of doing business index.]]
216	# '''Ideological Identity Idiocy''': This is the intersection of ArtisticLicenseEconomics and StrawmanPolitical. Often, a [[AuthorTract work that wants to make a political point]] will (probably accidentally, but possibly deliberately) make mistakes about the definitions of specific economic systems. In short, authors often don't know (or don't care) how economists actually define economic systems. Economic systems exist to allow a society to ''economize'', i.e. allocate their supply of ''means'' towards various different ''ends''. The supply of means is ''scarce'' because it cannot achieve all these ends. Thus, an economic system is something that provides a method by which these ends are prioritized and means are directed to fulfilling them.
217	# '''Money Has ''Intrinsic'' Value''': The idea that money is ''itself'' valuable. Money is only a medium of exchange: the value of money is not in ''what it is'', but rather in ''what it can get you''. The idea that people want money to ''have'' money is therefore fallacious: people want money to have the things that money can ''get them''. Getting the money itself is meaningless if there's no intent to use it or use for it.
218	# '''Currency as a Consumable Commodity (aka EnergyEconomy)''': The idea that currency should ''itself'' be a thing of worth that can be consumed. This is considered extraordinarily dangerous in economies that are developed, as currency itself only has a value as a medium of exchange. Currency that is tied to the value of a specific commodity ''can'' survive and be helpful - that's what the Gold Standard was for decades - but a currency that is ''itself'' a commodity can utterly destroy the proper concept of "value": when the choice is between whether to use your money to buy a good or consume your money to turn on a light, the economy is fundamentally going to break. Paper/electronic money doesn't ''change'', and there is a finite amount of money in the economy, which allows products to be properly valued: if there is only so much currency available in the economy, then the items in that economy have a specific value. If you increase the amount of money, you decrease the value of money that is already available[[note]]Inflation[[/note]], and if you decrease the amount of money, you increase the value of money that is already available[[note]]Deflation[[/note]]. Now imagine that money is ''constantly'' being produced and consumed, as in the case of energy: there's no way to determine the value of money because it will fluctuate wildly from day to day and ''second to second''. There will therefore be no way to determine the value of labor, of goods and products, of ''anything''. Say you get paid at the end of the day, 100 energy credits, and your co-workers, all 9 of them, also get 100 energy credits. You've just increased the amount of energy credits available for everyone by 1,000. So you decide to use your energy credits to purchase something to eat, along with your 9 co-workers, for 50 energy credits each. You've destroyed half of the money you've entered into the economy, which means your remaining money is now worth ''twice as much'' as it was before you destroyed it, so while you still only have 50 energy credits, you still have the ''buying power'' of 100 energy credits. And that's assuming that you're the only ones using energy credits at the time! And in case you're saying "well, just don't destroy the energy credits then", that leads to increasing inflation over time, to the point that your currency will be worthless when there's an ''infinitely increasing'' amount of it.
219	[[/folder]]
220
221	[[folder:Economic Systems]]
222	* '''Socialism''': In terms of UsefulNotes/{{Political Ideologies}}, Socialism refers to a broad family of ideologies united by an opposition to Liberalism and a goal of improving the lot of the working classes, refer to [[UsefulNotes/{{Socialism}} its page]] for details. However, self-proclaimed Socialists have advocated various different economic models, quite a few of which would fit under the category of "mixed economy" (for instance, market socialism and social democracy).\
223	In economics, ''Socialism'' is often used to refer to State Socialism; a scarcity economy where all the means of production are property of the State (on behalf of the working classes) and all economic activity is controlled by the State. Thus, economists typically refer to nationalization of a specific industry as the "Socialization" of this industry. However, there are many variations on this theme, mainly varying in matters of degree (i.e. how much control the State exerts over economic activities):
224	** ''Public Enterprise Centrally Planned Economy'' in which all means of production (stuff used to make other stuff) is owned by the State and all key economic decisions are made centrally by the State, e.g. North Korea in TheSeventies (it's an interesting mix nowadays) or, partially, the former Soviet Union, where always existed at least ''some'' tacitly allowed private sector.
225	** ''Public Enterprise State-Managed Market Economy'', one form of market socialism which attempts to use the price mechanism to increase economic efficiency, while all decisive productive assets remain in the ownership of the state, e.g. China, Venezuela (although Venezuela is moving towards the above), and arguably UsefulNotes/FascistItaly[[note]]whilst Fascism does have ''nominal'' private ownership of the means of production, all key economic decisions are made by the State, thus meaning the State has ''de facto'' control of the means of production (and what is [[PromotedToScapegoat ownership]] without ''[[TheManBehindTheMan de facto]]'' control?)[[/note]].
226	** ''Public Enterprise Employee Managed Market Economies'', another form of market socialism in which publicly owned, employee-managed production units engage in free market exchange of goods and services with one another as well as with final consumers, e.g. mid twentieth century Yugoslavia. Some versions have a single monopoly production unit for each type of product or service, while others have open competition between employee-owned businesses. Two more theoretical models are Prabhat Ranjan Sarkar's Progressive Utilization Theory and Economic democracy.
227	** ''Public Enterprise Participatory Planning'', an economy featuring social ownership of the means of production with allocation based on an integration of decentralized democratic planning, e.g. Catalonia during the Spanish revolution. More developed theoretical models include those of Karl Polanyi, Participatory Economics and the negotiated coordination model of Pat Devine, as well as in Cornelius Castoriadis's pamphlet "Workers' Councils and the Economics of a Self-Managed Society".
228	** Note: The "market socialist" models are arguably examples of mixed economies; some Socialists do not accept them as forms of Socialism.
229	* '''Mixed Economy''', '''Social Democracy''' or '''Social Market Economy''': An economic system where the scarcity economy is remedied by a mixture of both state and free market means. To qualify, both the State and the market must have a significant role in the economy (i.e. an advocate of free markets that gives a very small role to the State is not advocating a Mixed Economy, and a socialist that advocates a small role for markets is not advocating a Mixed Economy either). The vast majority of the world's economies, including those of Western Europe and the United States, fit in this category.
230	* '''Free Market Economics''' or '''Laissez-Faire''': An economic system where the scarcity economy is remedied exclusively via a system of private property. All the inputs to the production process are owned by individuals or voluntarily-formed groups thereof whose property rights are derived from those of the underlying individuals that make up said group (for instance, businesses with more than one owner).
231	** Some advocates of Free Markets give a slightly larger but still strictly limited role to the State, and some advocates of Free Markets are Anarchists that believe the existence of the State cannot be justified.
232	** Many economists use "Capitalism" as a synonym for "Free Markets", but amongst many schools of political theory (including most forms of Anarchism and Marxism), "Capitalism" refers to [[UsefulNotes/{{Capitalism}} any system that significantly allows private production]], describing both mixed and free markets.
233	[[/folder]]
234
235	[[folder:Post-Scarcity Economy]]
236	The supply of means is no longer scarce. This means that people don't ''need'' to economize. A society in this stage cannot be meaningfully described as any of the following labels since those labels only apply to societies with scarcity economies.
237
238	Of course, many systems described in fiction as post-scarcity are not post-scarcity. Scarcity exists as long as any human (or SufficientlyAdvancedAlien) cannot have all its wants met. If not everyone who wants the house on the hill, Jimi Hendrix's bandana, or the front row seats at a concert can have them, then there is in fact still scarcity. If TheSingularity is capable of producing any commodity (say, gold), then those goods won't need to be economized. However, if the Singularity cannot let everyone enjoy goods like the front row seats at a concert, then there is still a need to economize them.
239
240	This is not to say that it's impossible to imagine. If we're talking about a post singularity society, it is possible that they will figure out a way to replicate all the essential qualities of even seemingly unique goods. The house on that one hill next to that waterfall could be replicated right down to the waterfall and the hill with sufficiently advanced terraforming technology. We could reshape the landmasses of a planet to maximize the beachfronts if that's what people want. Even that isn't enough to completely eliminate scarcity, since an item's history might be what makes it desirable and scarce. Sure, the Singularity can produce a perfect ''replica'' of anything, but there are more collectors that want an authentic original than can possibly have it. No matter how perfectly you could recreate a copy of one of the surviving First Folios of William Shakespeare, it's the originals that collectors would want. A minor version of this can be seen today when a desirable collectible can be reprinted or reproduced, and the replicas almost invariably sell for far less and are far less desirable. This gets even more important for sites that are holy to some faith or culturally significant to a people. Imagine using the Singularity to replicate the Dome of the Rock or the Great Pyramid or the Nazca lines and claiming the replica is interchangeable with the original. Travel to and visitation rights for such locations would still be scarce. Alternatively, a society which exists totally within a virtual universe could get around this, since the original would just be some form of data.
241
242	There's also the issue that some things might be post-scarcity while others still need to be economized. For example, even if there was more than enough consumer goods for every person on Earth being provided by automated robots without human intervention you would still need an economy for things that cannot be reproduced that way, such as land (barring space stations or something similar) and unique items like antiques and historical treasures, but most people wouldn't care. This doesn't even require a singularity, the Earth's resources are such that it is virtually impossible for us to ever use it all. For example, enough energy falls on the Earth from the sun to power our projected energy needs in 2050 about 5000 times over, and that is without drastic measures like sending satellites into space to collect more energy. Collecting all that solar energy is difficult however. Similarly, there is an overabundance of water on the Earth, but most of it is salt water or trapped in the atmosphere and desalination is expensive while atmospheric condensers are still in their infancy, the farmland currently in use could feed 80 billion people if converted to emerging farming methods (and that's not even counting the possibility of farming more area) but that will take time and money, and enough raw materials exist in the Earth's crust to supply a virtually unlimited amount of consumer products including advanced technology and electronics, but harvesting it is hard. The majority of what we are economizing in the 21st century is actually labor, technology, and information, and advances in these areas could very well lead to major shifts in the world economy within a few years. Or not, the future is hard to predict.
243
244	Also note that there are already resources that aren't scarce, such as air. As such, this would yield exactly the sort of economy we have.
245	[[/folder]]
246
247	[[folder:Parting Thoughts]]
248	Finally, and as always, there is the general zeroth rule of the AuthorTract: Regardless of quality, writing a work of fiction neither adds nor subtracts empirical evidence to or from your point of view. It may display evidence, it may make an argument using that evidence, it may convince the reader using that evidence. However, merely writing a fictional work about a free-market/socialist utopia/dystopia does not prove anything. The only thing about which fiction can prove a point is fiction.

Context UsefulNotes / Economics