Sushi Economics

I love it when someone takes a complex economic concept and explains it in a simple way. I even like the attempts that don’t quite make it, like this one explaining Austrian Business Cycle Theory and it’s implications. It’s a good attempt, and funny too, but I found it too long and involved. Here’s my humble summary:

  1. There is an optimal way for a society to allocate it’s resources, but it constantly changes and no one knows what it is.
  2. Resource allocation is therefore always sub-optimal.
  3. When resource allocation is sufficiently sub-optimal, people recognize it and make adjustments to their behavior.
  4. Adjustments to resource allocation take time.
  5. During the period of adjustment, some resources (including labor) cannot be put to use at all. We call the labor part of this unemployment.

In our particular situation, society devoted too much resource to building homes. People recognize this, and adjustments are being made. Unemployment is going up. People are homeless and homes sit empty, as anyone understanding capital theory would expect.

My explanation isn’t going to set the world on fire either, but I’ll keep working on it.

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