Tuesday, October 14, 2008

Do I stick the test-tubes in my ears?

Um ... no.

One reason why I decided to set aside developing TEA analysis, which I have actually done two or three times over the past two or three years, is that at least on the surface it looks way too complicated. How do you approach the development of an entire new branch of economics, especially when you are a little hampered by not being an economist?

Finally, I decided to approach it by creating a site, posting a succession of thought experiments, and prevailing upon my friends in the economic blogosphere to add their thoughts, and their experiments, hoping that over time some reliable principles and structures will emerge from the primordial ooze.

Of course, doing something like this requires that I give my friends some vague idea of what I am going on about. That's why I wrote up post number one and placed it here. As you can see if you read it, it comes to a rather abrupt end because I ran out of thoughts and because even I could see that it was time to stop rambling and start trying to pin things down.

So -- thought experiments. In sociology and economics often the only experiments you can do are either thought experiments, or natural experiments -- i.e. looking at events in the real world and seeing what happened there.

If you're going to do this sort of thing on a shoestring, a thought experiment is your method of choice.

So I will begin with one scenario that I have also used in other people's blogs. It has to do with who creates value.

Imagine you have a nation of 100,000 people, divided into 99,000 people living at middle-class income or lower, versus 1000 people living well above that level. That is, in fact, pretty much a description of the US economy at the moment.

One night, an angel appears unto the 99,000 people, offering them a one year trip to Heaven. (This is a cheerful thought experiment -- no middle-class people were harmed in carrying out this experiment).

This all happens overnight. When the sun rises, all the 99,000 people are gone, leaving the 1000 behind. (we will assume that this is a fairly small nation, perhaps 50 x 50 miles in size.)

Question: what sort of economy now exists?

I will leave this to your thought today, and return to it sometime tomorrow.

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