A No-Nonsense Guide to Economic Principles but With Wacky Internet References
Economists live a lifestyle that you and I could only dream about. Their days are filled with fast cars, fast women, and an unquenchable thirst for the blood of innocents. But behind that rock star-like profession lay a mysterious system of markets that few people understand.
Most people my age were not taught economics until their senior year of high school. Consequently many high school graduates enter the workforce or college with no real idea on how markets work. I sure as fuck canít make heads or tails of it.
Thatís why Iíve decided to fill the gap and write a no-nonsense, simple to understand guide on the key principles of economics that even someone who spends most of their time playing Maple Story can understand. Itís about time you nincompoops learn something about our market system or Iíll slap you with the invisible hand!
The Invisible Hand of Market Prices Directs Buyers and Sellers Toward Activities That Promote the General Welfare
The "invisible hand" (no not the 1920 western directed by William Bowman and starring Antonio Moreno as John Sharpe, a.k.a. ďThe NeedleĒ) is a fundamental economic concept first coined by legendary economist Adam Smith.
If I should have an invisible hand I might use it to lift up womenís skirts while they are not looking. Should they accuse me of any wrong doing I shall proclaim, ďBut madam, I have no hands.Ē But I do have hands and they are invisible.
Have you ever wondered how a store has the right amount of Chobits DVDs? There are enough copies so that there is a DVD for everyone who wants one, but not too many that they go unsold. How any amount of Chobits DVDs could be left on the shelves unpurchased is unimaginable to me.
Itís simply the invisible hand at work! Consider the price of the Chobits Volume 1 DVD. Chobits currently sells for $26.99 per volume, or roughly $9 per episode not including tax (how tax rates affects sales of Chobits DVDs will be covered in my next update).
High demand and high price gives Pioneer the incentive to create more volumes. Consumers will pay the price only if the value of each additional episode, its marginal value, is worth at least as much to you as the price and if it comes with a kawaii (cute) wall scroll.
If the demand for Chobits decreases, and I doubt it will, retailers will experience a surplus inventory of DVDs. The invisible hand will move the price down so that more DVDs are sold and supply once again matches demand.
Letís consider the book Iím lifting ideas for this update from. Itís called Common Sense Economics: What Everyone Should Know About Wealth and Prosperity. The amount of text I lift from the book places a cost on the publisher of having their work plagiarized. If the marginal cost of each word plagiarized exceeds the marginal benefit of the next person that clicks the link and is exposed to their book then they decide to sue me.
The invisible hand guides consumers in directions that promote the general welfare and could be a good name for a Japanese porno about subway rape.
People Must Utilize Scarce Resources Efficiently to Satisfy Their Unlimited Wants
Because there are only a limited number of resources on Earth, we must divide up these resources in the most efficient way possible in order to satisfy some of our limitless wants.
What if Chobits DVDs were completely free for anyone to order? People who donít even like Chobits would order them because there would be no incentive to not order them. I would order them and chuck the discs at cars because my need to chuck shit at cars is virtually unlimited.
Price acts like a barrier to participation. Chobitsí $26.99 price tag keeps people who donít like anime from taking up scarce Chobits resources, and allows those who really want them to purchase them. Because I donít know what Chobits is I have an incentive to not give Amazon.com $26.99 for a copy. The incentive is that I get to keep my money.
The Chobits market is just one of many efficient and neatly organized market systems that illustrate the principle of scarcity.
Rational People Make Decisions at the Margin
Economics assumes that people act rationally, that is, in their own best interest. This principle doesnít quite apply to people who spend most of their time online. There simply isnít a whole lot of rational thinking going on in the first place. When it comes to managing the scarce resource of time Internet folks are the worst of all.
Thatís why they get duped into taking surveys in the hopes that theyíll be sent a free ipod or a check. Thereís no scarcity of opinions on the Internet so your dumb opinions donít have any value. They want your email address, dummy. The penny they get for it is more valuable than anything you have to say.
Many people who use the Internet are actually normal. They were scammed into paying 3 grand at the Apple store for something they only use to check to see if grandma sent them an email. They arenít staying up until 3am reading about Sonic the Hedgehog on Wikipedia.
Rational people make decisions at the margin. Internet people never even knew there was a margin to begin with. Iíd explain the economies of experience points and gold pieces, but that would be about the most useless exercise ever.
ďWhat is the opportunity cost in terms of levels gained if I go to sleep right now?Ē
Well guy, Iíd say hit level 48 tonight because you sure as hell have nothing to wake up for tomorrow. When youíre talking about people whose most valuable possession is a level 60 wood elf ranger I donít think opportunity cost ever comes into play.
ďIf I keep playing I forego all of the possible sex I could be having right now.Ē
I think you can relax buddy. Just keep playing.
Trade Can Make Everyone Better Off
Consider for a minute that you had to pay full market value for all of the music, movies, and video games that you enjoy. Quite a scary thought isnít it? Fortunately through trade, everyone can enjoy more music, movies, and games than they ever could on their own.
Donít close that file sharing program! Donít uninstall BitTorrent! Youíre just demonstrating the basic economic principle of interdependence and gains from trade.
Letís take two Internet users that pirate games and movies. In an 8 hour period dBz~BaLLaZ6969 can rip 32 Xbox ISOs (his older sister works at Blockbuster and can get ALL the rentals she wants for free because sheís employee of the week) or record 4 movies directly off a theater screen.
DarkRiku87 can rip 8 Xbox ISOs or record 2 cam rips (he gets nervous and shuts off the camera when the usher comes in and also pisses himself).
At first glance it seems like dBz~BaLLaZ6969 doesnít even need DarkRiku87. If he split his time evenly dBz~BaLLaZ6969 could come away with 16 ISOs and 2 cam rips. But watch as trade makes both of these pirates better off.
To find out who should produce what we have to figure out what the opportunity cost of producing these two goods is. For dBz~BaLLaZ6969 he must give up 8 ISOs to get 1 cam rip. Inversely, he must give up 1/8 of a cam rip to get 1 ISO.
DarkRiku87 must give up 4 ISOs to get 1 cam rip and 1/4 of a cam rip to get 1 ISO. While dBz has an absolute advantage in both products (he can produce more of each), he has a comparative advantage in ISOs and DarkRiku has a comparative advantage in cam rips. DarkRiku should produce only cam rips because he must give up less ISOs to get 1 cam rip than dBz~BaLLaZ.
Here is a graph that illustrates this concept in plain detail.
As you can see both pirates come away with 2 more Xbox ISOs than they would if they did not engage in trade. Although it isnít quite what economics textbooks had in mind and itís highly illegal, you can plainly see that 15-year-olds who canít get their moms to buy them video games and movies are better off from trade.
Too Often Long-term Consequences of an Action Are Ignored
Too often the long-term consequences of an action are ignored. These consequences can also be called negative externalities. This too can be applied to the consumption of anime.
Recall that the first law of anime is ďAnime is gayĒ. Adam Smith later built on this theory and created the second law of anime which states, ďYou are gay if you watch animeĒ.
Usually the cost that anime fans place on the rest of the Internet does not exceed the benefit to the users. Basically we tolerate their shit. But occasionally anime fans get way too gay. Once again the invisible hand moves into action.
Web sites like Somehting Awful and CNN feature Pokemon face sitting bukake hentai as Awful Links of the Day. This shames people into watching less anime, closing down their guestbooks or blogs, and hopefully committing suicide. The gayness effect of anime is reduced to acceptable levels.
A public policy approach to reducing negative externalities is called Pigovian taxes. The government could fine each anime fan $50 for every 10 hentai tentacle rape images they upload to the Internet. This would give anime fans an economic incentive (recall that people respond to incentives) to cut back on how many Naruto music videos they upload to YouTube thus reducing pollution on the Internet.
When the principles of economics are applied to the things we really care about, economics suddenly comes alive! Anything can be explained in economic terms, from how trade restrictions affect the price of Dragon Ball Z hentai to why a girl would let a dude piss on her face and film it for a web site.
We hope that this guide has helped you understand the world you live in a little better. If I can just reach out to one person, and that person gives me a million dollars, itíll all be worth it.