Stephen Monrad

Imagine a world where rationality reigns.

To understand the promise of market economies, let’s imagine a world where people can be rational. In a world where people can behave rationally, markets should be able to efficiently get the job of organizing and distributing production done. Instead of imagining a world where people are a lot smarter, let’s focus on a world that is much simpler. By seeing what market economies can deliver, we might be better able to see how they are failing us today.

One simple goal

To be rational, you have to have a clear goal. Part of what makes being human tough is that we don’t have a clear idea of what it is that we need to be happy. In my simple world, let’s assume that the only thing people need to be happy is apple pie. The more apple pie you have, the happier you are. Everything else in the world is meaningless.

Farmers and bakers

If an individual could efficiently do everything that is needed to produce an apple pie, there would be no need for economics. People could just go their separate ways, making as many apple pies as they could. In my rational world, there is a problem. People are more efficient if they focus their effort on one part of pie making. People either focus on growing the raw materials for pies or converting the raw materials into pies. That is, people are either farmers or bakers.

No, the math doesn’t come next.

To people who have studied economics, this probably sounds like the lead up to a mathematical model. That’s not where I want to take this. Instead, over the next several posts, I’m going to explore this simple world. I’m going to describe how the economy works in words. Then I am going to try to imagine what it would be like to live in such a world. I’m not sure exactly where this will lead. However, my hope is that we will learn something about the shortcomings of real-world market economies by comparing them to an ideal situation.