Today's Economic Situation In One Really Super Easy Lesson

10 07 2008

I’m going to be teaching an undergraduate economics course next semester, and I’m thinking about using this little lesson from Dmitry Orlov to help keep things in perspective. Dmitry discusses a series of economics questions about the effects of various factors on someone who is in a bad spot anyway (that would be you and me). He skips the messy details and gets right to the point by framing the questions from an engineering perspective:

…I am not an economist. I am an engineer by training. And so here’s a question I should be able to answer. Joe’s stereo system is on fire. It kept blowing fuses, so he wrapped the fuse in tin foil, and then rats chewed through the speaker wires and shorted them out. What effect will graphic equalizer settings have on the sound quality of his stereo system?

None at all.

Dmitry is an interesting fellow, having lived through the collapse of the former Soviet Union, and has shared his thoughts concerning the similarities and differences between that scenario and our current situation in America, in an article entitled Post-Soviet Lessons for a Post-American Century. Its well worth the read! Mr. Saenz linked to some other interesting Orlov pieces here.




One response

12 07 2008

Wow, many thanks for the Orlov stuff. That second article, “Post-Soviet Lessons …” was a great read, mainly because I hadn’t sought out or read an eyewitness account of the Soviet collapse.

It did strike me as incorrect in some ways, though. Those comparisons only work to a certain extent, but they leave out the degree to which the Soviet lifestyle was undesirable. I remember taking a history class on modern Russian history, and during a break some of the guys (middle-aged) were saying that, compared to Stalin, Lenin was pretty okay. They thought it would’ve been decent to live under his rule. Well, if the secret police didn’t go after you, you’d still be a poor son-of-a-gun with little freedom to worship.

He raised a great point but didn’t push it. The degree of severity of hardship in post-collapse America — if that happens anytime in the next century — depends very much on where you live. Take the recent natural disasters. One city gets struck by a hurricane, another city floods. One is a social nightmare, the other remains calm and orderly. That’s the difference between New Orleans and Cedar Rapids. The point is to make sure you have great neighbors, not just next door but in your county and the surrounding counties. In contrast to the state-sponsored atheism in Russia, which at best created a moral drag on social life, many places in the U.S.A. ought to be far better in terms of cooperation and adjustment to a different lifestyle.

We shall see if all of what Orlov talks about takes place. The financial situation always teeters on the brink of recession/depression because of the presence of fractional-reserve banking, the Fed, and U.S. government and consumer debt. But the modern lifestyle can recover from any kind of failure in that system. Peak oil and peak metal outputs are a whole other, more ominous deal though.

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