And the presence of an atmosphere is very good for transmitting sound waves, so that I can hear a storm approaching.” These attributes of the island are also extremely useful to Crusoe, and contribute to the achievement of his goals. There is a plentiful supply of oxygen here, meaning I won’t suffocate. That is, he appraised himself of the stockpile of physical items available for his use that exhibited scarcity.Īfter all, Crusoe could have truthfully said, “Hmm, this island is subject to the earth’s gravitational pull, meaning I won’t drift off into outer space and freeze to death. In economic jargon, Crusoe took an inventory of the goods at his disposal. You probably realized, with Crusoe, why the particular items mentioned in the previous paragraph were relevant to his situation, and would be among the facts that you would consider if you found yourself in Crusoe’s place. Crusoe’s mind begins whirring as he decides what to do first.Īt this point we can stop and describe the situation in terms of economic concepts. There are several rocks of varying sizes, as well as strong vines.
Crusoe notes that there are plenty of coconut trees, as well as some small streams of running water in the distance. He climbs to the top of a hill and surveys the island.
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Rather than resign himself to his fate, Crusoe decides to take action to alter the unfolding of history, so that events transpire in a manner more to his liking.īefore he can make a sensible decision on how to proceed, Crusoe first needs to see what he has to work with. His stomach is starting to rumble, his throat is dry and itchy, and he doesn’t see any natural shelter from the horrific rainstorms that must occasionally strike the island. But to avoid overwhelming students at step one, we are here starting out with the simpler case in which Crusoe is (initially) all by himself and must act to improve his situation, given his circumstances.Ĭrusoe Creates Goods With His Mind PowersĪll alone on his tropical island, Crusoe quickly realizes that he doesn’t like the way things are developing. These general principles will still hold true, even when Crusoe is rescued and returned to civilization. Obviously, we are not saying that an isolated person is an accurate description of a modern economy Rather, we are saying that before we can analyze an economy composed of billions of interacting people, we should start with just one person and make sure we understand what makes him tick.Īs you will see, in this lesson we are developing general principles about an individual’s purposeful actions in the face of scarcity. Over the years, many critics have derided this so-called “Robinson Crusoe” economics, named after the shipwrecked mariner in Daniel Defoe’s famous novel. There are a surprising number of conclusions we can draw even in this extremely limited case. Yet before we dive into the deep end, we will sketch out some of the basic economic truths that apply even in the very simple case of a single person on a remote island. This is what most people probably think that a book on economics is supposed to do! We will now begin our full-blown analysis of a market economy with buyers and sellers using money in their transactions. You have previously learned that economics is the study of exchanges, and you have also learned that the apparently simple decision to classify human behavior as “purposeful action” leads to many insights that will help us explain how modern market economies operate.
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