Tohm Curtis continues his slightly sarcastic economics 101 series

photo credit: technicolorcavalry

The most common constraint on fulfillment of wants is time. I cannot write this post, and go to the beach and swim. I have to do one or the other in that same portion of time. There are only so many days I am alive, I have to decide what to do with my time, all the time. I want to do more with my life than I ever possibly could. I wouldn’t mind studying 16 university degrees whilst working 8 or 9 different careers while actively participating in at least 10 different sports that I would enjoy dedicating myself to. I can only pick a few of these because I don’t have time.

I also don’t have the resources at my disposal, namely money, so again I can only choose to do what I can afford in both time and money. But what is money worth? It is worth what you can buy with it. So taking the statement relative to wants, resources are limited a step further. The only things we can buy exist. We can’t buy things that don’t exist, things that exist are part of nature, and nature can only provide so much. There is only so much oxygen that we have access to, there is only so much water that we have access to.

photo credit: ArtBrom

Bill Gates Davos speech on Creative Capitalism has spurred an interesting array of online debate. Gates essentially re-branded Corporate Social Responsibility within the speech, outlining how corporations serve themselves and society best by considering the wider ramifications of their activities.

Speaking as the world economy crashes like Microsoft OS, Gates proclaimed:

I like to call this idea creative capitalism, an approach where governments, businesses, and nonprofits work together to stretch the reach of market forces so that more people can make a profit, or gain recognition, doing work that eases the world’s inequities.

Ironic that a guy who recently left one of the world’s most powerful monopolists is now calling for some of the rent seeking profit to be shared back with the community. Creative Capitalism should not require RED branded product placement by the world’s most powerful monopolists. No matter how much money well intentioned corporates donate to the poor, without deep rooted reform of the monopoly capitalism marketplace we live under, poverty and disease will continue.

photo credit: mhalon
as according to Tohm Curtis
a new series outlining why Economic Rehab is crucial

What does ‘Economics’ mean…there’s some confusion as to whether it is a science or a philosophy? Wikipedia can provide some insight into the history of economics. I think though that maybe the simple starting point is:

Economics is the study of reality.

Okay so what do I mean when I say Economics is a study of reality? What I mean is that this is really what makes it a science. I would say the exact same thing of Physics, I would say the exact same thing of Mathematics. Bertrand Russell incidentally said ‘Pure mathematics consists entirely of assertions to the effect that, if such and such a proposition is true of anything, then such and such another proposition is true of that thing.’

In Physics this means Isaac Newton’s description of gravity as any two masses exerting a constantly attracting force on each other is true. That is what happens in reality. For Physics to work, you can’t have a law of gravity that has exceptions. A theoretical world where some people fall towards the earth and other people float up into the sky would not hold as science. The laws have to conform to reality. They must be based on observations of things that happen.

Economics supposedly represents a scientific reality. Just we seem to get surprised in Economics much more regularly than we do in Physics or Mathematics.

photo credit: BK59

Last night saw the media highlight two essential points. On the same day that BHP announced it’s fifth consecutive record profit of $17.8 billion for the year, 4 Corners discussed how high land and housing prices in the mining town of Port Headland were strangling the community.

Both media pieces overlooked the fundamental role of the community in creating the value that naturally accrues to natural resources. Over the last 5 years of record profits for BHP, the ratio of royalty related payments to dividends has averaged 50.6%. In 2003 shareholders received 61% more in dividends than all tiers of government from resource rents. It was around this time that BHP CEO Chip Goodyear chided the business community with comments like ‘Our hard work has paid for your tax cuts’. In 2007 the community received 56% of the amount paid to shareholders. Why should shareholders get more than the rest of the community?

We ask here whether so called owners of resources are entrepreneurial geniuses or just extremely privileged to benefit from the gifts of nature? For that reason, Government should have the courage to withstand the criticism to any changes in royalty rates. Since when did mining companies and land developers become royalty? Why should mining companies have the right to demand meetings with government to ‘negotiate’ what it will pay?

Port Headland demonstrates the danger of allowing what is technically known as economic rent to accrue in land prices. Watch 4 Corner’s The Money Pit: A Boom town running on empty and put the 2 + 2 we discuss here together.

[/caption]…..so jumps the headline on p3 of today’s Business Age. As we prepare to head off to the Baby Boomers Expo this weekend, we are armed with even more data …