What a great yarn, Mike. It reminds of Zeno's Paradox, which is not easy to solve, even though we all know that in fact a runner CAN cross the finish line.
With Pumphandle, we sense that there must be a flaw. But where is it? I think it lies in the initial smoothly presented assertion: that the tourist will put a $100 bill on the desk and then go off to inspect the rooms. In fact, the tourist won't put any money on the desk; he will merely ask to see the rooms, and go check them out, and then turn them down and leave. So there is no $100 bill to enter if temporarily into the economic life of Pumphandle. Now what if the story were changed to posit that the Pumphandle City Council puts $100 into the local economy, triggering the sequence of debt payments posited in the story? Sounds pretty good, right? But the reality is that nothing of economic value will have been created. The pre-$100 bill economy sports mutual off-setting debts, yes, and so the debt apparently hanging over everyone is eliminated, but it seems that Pumphandle is an economy where people are content to be paid when their creditors can afford to pay, so the relief may not be of any great value. One could as well simply gather everyone in the Town Hall and have a debt exchange process: anyone owing an amount identical to what they are owed by someone else gets both what they owe and what they are owed forgiven. Those with disproportionate "owe to's" relative to "oweds" simply accumulates a net debt or net credit. It would be fascinating to organize such an exchange within a locality that finds itself with ! significant localized debt. No need to introduce a naive tourist into this scenario. This one was easier to quickly answer than Ray's extraordinarily interesting "Rules" posting and the separate matter of the differences in the structural approaches to economics and life of Ray and Keith, which I am still with great enjoyment pondering.... Happy holidays to all! Cheers, Lawry On Dec 22, 2010, at 3:03 PM, Mike Spencer wrote: > > I really, *really* don't know how money and finance work at the macro > level. As with many people, my model for economics is the the sale of a > pig by one farmer to another, the biz of a small tradesman in colonial > America or the like. So here's an easily followed analysis at a scale > that I can grasp, however lacking in detail if not totally spurious. > > > It is a slow day in the small Nova Scotia town of Pumphandle, and > streets are deserted. Times are tough, everybody is in debt, and > nearly everybody is living on credit. > > A tourist visiting the area drives through town, stops at the > motel, and lays a $100 bill on the desk saying he wants to inspect > the rooms upstairs to pick one for the night. > > As soon as he walks upstairs, the motel owner grabs the bill and > runs next door to pay his debt to the butcher. The butcher takes > the $100 and runs down the street to retire his debt to the pig > farmer. The pig farmer takes the $100 and heads off to pay his > bill to his supplier, the Co-op. The guy at the Co-op takes the > $100 and runs to pay his debt to the local prostitute, who has > also been facing hard times and has had to offer her "services" on > credit. The hooker rushes to the hotel and pays off her room bill > with the hotel owner. The hotel proprietor then places the $100 > back on the counter so the traveler will not suspect anything. > Shortly, the traveler comes down the stairs, states that the rooms > are not satisfactory, picks up the $ 100 bill and leaves. > > No one produced anything. No one earned anything. However, the > whole town is now out of debt and looks to the future with a lot > more optimism . > > And that, folks, is how a Stimulus package works. > > > Not mine. Found on the net. > > -- > Michael Spencer Nova Scotia, Canada .~. > /V\ > [email protected] /( )\ > http://home.tallships.ca/mspencer/ ^^-^^ > _______________________________________________ > Futurework mailing list > [email protected] > https://lists.uwaterloo.ca/mailman/listinfo/futurework _______________________________________________ Futurework mailing list [email protected] https://lists.uwaterloo.ca/mailman/listinfo/futurework
