8.

7 Afrikaanse kinderstorie

! Die tyd gaan verby. Greon begin hemde maak en Roi broeke. Greon het ‘n Hempmaakbesigheid Roi het ‘n Broekmaakbesigheid. Die hempbesigheid het nou 100 hemde. Die broekbesigheid het nou 20 broeke. Greon vir Roi – “Ek ruil een hemp vir een van jou broeke. Hulle se dis gaaf – kom ons maak so. Hulle ruil een hemp vir een broek. Hulle is albei gelukkig. Greon is gelukkig want hy is al ‘n bietje moeg om net een ou broek te dra – Die broek wat hy nou dra sit te lekker aan sy lyf. Roi is gelukkig want hy is al ‘n bietje moeg om net een hemp elke dag te dra – Die hemp wat hy nou dra laat hom alte netjies lyk…hy is al ‘n bietjie moeg vir sy ou verslete hemp. ‘n Dag of twee gaan verby. Greon sê vir Roi – “Ek is weer lus vir een van jou broeke. Ek gee vir jou een van my hemde vir een van jou broeke. Roi se – dis ‘n bietjie van ‘n probleem vir my ek het nie meer so baie materiaal vir broeke nie. Hoekom gee jy nie vir my drie van jou hemde vir ‘n broek nie dan kan ek iets kry om te eet en materiaal koop. Greon se nee dit is ‘n bietje kwai gaaf, ek gee jou drie hemde dan gee jy my twee broeke dan kan eek ook iets kry om te eet – Hulle toe “kom ons maak so”. Hulle ruil twee broeke vir drie hemde. Hulle is albei gelukkig. Roi is gelukkig want hy het nou drie hemde vir twee broeke gekry. Roi neem toe een van die hemde en ruil een vir ‘n brood met Mnr Roodt en die ander vir materiaal met Mat. Greon neem een van die broeke en koop ‘n vis by Mnr Visser. Almal is gelukkig met hulle transaksies want almal het iets wat hulle nie gehad het nie gekry in ruil vir iets wat hulle baie van het. Die volgende dag gebeur daar toe ‘n snaakse ding...

6. How to kill an economy and destroy jobs.

If I were asked to “destroy jobs in SA” what would I do?

Ensure that everybody in a job is taxed as much as I can – it will surely destroy the incentive of wanting to work.

Ensure that everybody that is not in a job is paid an amount if he/she is registered as unemployed and offer grants for their children. Also make sure that social grants are increased as much as you can so that as many people as possible could benefit – it also increases the incentive not to work and have to care for their own.

One can also destroy jobs by introducing price controls – this limits profits and the incentive of growing businesses and employing more people.

Introduce price controls and taxes - it limits the profits companies make and have available to invest in additional machines and productive resources and thus reduce employment.

Impose high criteria for job entrants – these requirements will prevent young people and people without skills of entering the job market and so reduce their ability to learn informally and cheaply on the job. These hurdles for new entrants can be couched under the guise of protecting the public or keeping out the riff-raff – the effect will be the same: keeping less educated out of the possibility of getting a job and learning while performing entry level tasks. The vested interest groups of the "professions" act as huge barriers to the not so privileged to enter particular markets

Make it difficult for companies to fire people – this will make them reluctant to employ people in the first place.

A surefire way of destroying jobs is just to pile up the bureaucracy – BEE reports, FICA, credit act, forms, reports, tax clearance certificates, - this will keep productive organisations too busy to produce wealth and jobs.

Create many government bodies that rely on the private sector to populate committees, project teams, and governance boards. Change the way things are done on a regular basis - this ensures that attendance to conferences and workshops occupy the productive time of people that could be used to the creation of goods and services.

Establishing a bloated public service is a method of destroying real work - by real work is meant – producing goods and services other people want and are prepared to pay for.

Get governments to hold a monopoly on key industries on hospitals, public transport, postal services, electricity generation, protection services, refuse removal and schooling – such competition from subsidised organisations just puts in that extra hurdle in the path of the entrepreneur that can do it more cheaply, more efficiently, create innovative solutions to problems and through his actions – creates real work.

Tax is the best way to destroy jobs – the more one taxes anything the less one has of it. This is where the focus should lie in keeping people poor and jobless. One should leave no stone unturned to tax and ensure that taxes are increased are paid for by the productive sector of the economy. High import taxes also increase the cost of production to make our exports uncompetitive - this also vause the economy to shed jobs...

These taxes should be also be used to make government bigger – this will make it look as if one is growing employment, but what one is in fact doing is exactly what ticks do to the animal they are living off. They are thriving while the animal (economy) is dying. A sure way of killing jobs.

Encourage minimum wages - most entry level economy students will be able to tell you that supply of labour will increase - but the very demand for that labour will decrease. Here is an extract from an FMF article that clearly highlights the problem: "Another job-stopper is the minimum wage. COSATU’s Patrick Craven says the IMF is wrong to suggest that labour unions should commit to “wage restraint”. He says that even higher wages will bring about higher economic growth by stimulating consumer sales. Let’s take this argument to the extreme to see if it is valid. Pass a law that says every worker must be paid R50,000 per month. How many businesses would survive and how many people would still have jobs? Common sense tells us that such a high minimum wage would cause massive job losses. It also tells us that at any level, enforced minimum wages cause some degree of unemployment. There is no escape."

Punish people for employing people - By making it very difficult to get rid of people that do not perform well and imposing onerous processes to sever the relationship with employees by employers, one limits the willingness by employers to enter into a mutually beneficial relationship in the first place. This leads to what can be termed as Regulatory unemployment: That is unemployment caused by laws and regulations. During the Apartheid years job reservation laws, pass laws and other measures caused hardship and misery through forced unemployment. In the same way do minimum wage laws, BEE legislation and other laws currently prohibit the entry into paid employment for many individuals and ensure that people who wish to enter the job market are restricted in doing so freely.

Encourage cronyism - get your comrades in the cader do the job rather than the best person for the job - that way you build the ongoing loyalty of the select few to your political hegemony.

Jobs are a result of economic growth - let us not kill the goose that lay the golden eggs: Free Market Capitalism

5. Society

Society is a fiction. As is government. As is "the economy". These concepts only exist in the abstract. There are only individuals seeking their own self-interest. And in so doing they often band together to take by force that which does not belong to them. Most of the time however the collaborate voluntarily and make cosentual arrangements to assist one another by trading.

Some people may say it is my duty to ensure that a person in some rural town has running water. While the provision of running water may be a goal for a group of politicians that have organised themselves into a group called the National Party, the ANC or any other such grouping, what gives them the right to confiscate my wealth for that purpose? If I concede that they may have the right to do so because of the fact that we belong to a particular "society" - why do we draw the lines around "society" as being within the South African borders? If there is a more needy situation in Blantyre shouldn't the South African needs be made subservient to that - then why not Sudan - the Blantyre community is "well off" in relation to them. Surely society should encompass the whole of humanity. The question arises "Am I my brother's keeper?"

No, groups form, or rather band together, in order to exploit those that are weaker than them and at the bottom there is the individual who is rather defenseless against these onslaughts of SARS, the Mafia and other such groupings. C.M. Heydenrych

Post 3. The Economy - The bigger picture: National Income Accounting (micro and macroeconomics)

You need to grasp what is meant by "the economic cycle"

Macro-economics has to do with the total production of goods and services in an economy.
This would then also account for the total expenditure on those goods and services. The total income - which is earned by employing the factors of production will also be part of the national accounting system. Issues such as the total employmnet level in an economy, the general level of prices of the goods and services, the total supply of money in an economy will all be issues that will fall into the ambit of Macro-economics.

These processes are encapsulated in what is generally referred to as the "economic cycle"

In the first place it is important to understand that the economy consists of, or can be classified into, different sectors. Firstly one has the "households" on the one hand and "firms" on the other. These participants are the decision makers regarding the transactions that take place between them. These transactions - how many, what and the prices at which these transactions take place is studied in Miroeconomics (also called Price Theory).

Their relationship is also influenced by other participants, namely the Public sector (Government) and the foreign sector (imports and exports) and Financial Institutions. This expanded view is studied in Macroeconomis (obviously there will be an overlap between the two.

Decisions between the participants are influenced by the values that they attain when trading with one another. The households want the goods and services to satisfy their needs - the firms want what households have to offer - land, capital, labour and entrepreneurship. As one can see the split between firms and households is an artificial one because in reality they are the same entities - labour may be a slight exception, though labour is a very important source of financial capital in the form of savings (through pension funds and other instruments).

There are two characteristics which affects the decisions of the households and firms in deciding how much to spend on which resource - firstly it is the scarcity of the required resource for a particular purpose and secondly the alternate use to which a particular scarce resource can be employed.

This decision is led by the marginal value that can be attained by employing a particular resource for a particular purpose. This marginal value is expressed by the price of the resource or good. This process will be explained later when we look into marginal value.

The economic processes that the economist is interested in is: Production (price and quantity), how prices are formed in a market, the role of the entrepreneur, the effect of economic freedom versus control, the relationship between economic freedom and wealth creation, trade, consumption patterns, how some economic systems keep people poor, the effect of property rights regimes on the creation of income and wealth, the effect of government involvement in an economy, expenditure and so on.

It is also important that the student of economics understands what markets are and how they operate.

At this point it will be a useful investment of your time to read the Wikipedia article on Economics

Post 2. A programme in Microeconomics - starting with price formation

Economics is a social science that studies human behaviour as a relationship between ends and scarce means which have alternative uses. Consequently, economics examines the problems that arise when individuals and firms have consumption desires that are constrained by access to resources. This is called "the economic problem" is often referred to as infinite wants and finite resources.

Infinite wants are the limitless desires to consume goods and services. Finite resources are the limited amount of resources that enable the production and purchase of goods and services. Resources refer to factors of production which are needed to make goods and services: land, labour, capital and enterprise.

The first tool to use when we wish to understand how prices are formed in relatively free market is called the supply curve. The supply curve shows in a chart form or in a graphic form the quantities of a particular good (product) that will be offered at different price points. Here is an example:

(Adapted from: Economics, Michael Parkin). The supply curve can be seen to run upwards from bottom left to top right, showing the higher quantities that will be offered for sale at higher prices. The reason for this can be found in the profit motive which underlies all human behaviour. The greater the benefit for a particular action to be performed, the higher the likelihood that that action will take place and; or put in another way - people will do those things that lead to them gaining some value or benefit. In economic terms one can say the higher the value obtained (the price) the more of a particular good will be offered for sale on the market. Higher prices lead to larger profit margins and if higher margins can be obtained the more of a particular product will be produced and sold. We also know that the more of a product you have the lower the marginal value to you - therefore the benefit that you attain at higher prices are even greater. There is however the matter of the law of diminishing returns which has the implication that because of the fact that in the short term the producer, if he wants to increase output to maximise his profit he will face, beyond a certain point, an increase in total cost which will require a higher price for a profitable sale to take place. These two factors explain the upward slope of the supply curve. The second tool to use when we wish to understand how prices are formed in relatively free market is called the demand curve. The demand curve shows in a chart form or in a graphic form the quantities of a particular good (product) that will be purchased at different price points. Here is an example:

(Adapted from: Economics, Michael Parkin). The demand curve can be seen to run down from top left to bottom right, showing the higher quantities that will be purchased at lower prices; or the converse thereof which says "As prices rice less of a particular product will be purchased. The reason for this can also be found in the profit motive which underlies all human behaviour. The greater the benefit for a particular action to be performed, the higher the likelihood that that action will take place and; or put in another way - people will do those things that lead to them gaining some value or benefit. In economic terms one can say the higher the value obtained (the product) in relation to the cost the more of a particular good will be purchased on the market. Higher prices lead to a smaller benefit to the consumer (and lower prices to a higher benefit)and put differently, if a higher benefit can be obtained in relation to the cost the more of a particular product will be bought and consumed. Two for the price of one is better that only one! We also know that the lower the price of a product the more of that product you will be able to purchase at a given price. The value in relation to the price will be more desirable. - therefore the benefit that you attain at lower prices are higher. These two factors explain the downward slope of the demand curve. This results in the formulation of another economic law - the law of demand The Law of Demand: Other things remaining the same, If the price of a good rises, the quantity demanded of that good decreases. If the price of a good falls, the quantity demanded of that good increases. So, the demand curve normally runs downwards from the left to the right because new buyers can only be persuaded to buy and others to buy more of a product at a lower price. To summarise then - in the event of a change in price there will be a movement along the supply or demand curves. The quantity demanded or quantity supplied will move in relation to the changes in price. If there are any other influences other than in price, it will result is shifts of the corresponding curves. This can be illustrated like this:

(Adapted from: Economics, Michael Parkin) or like this:

What causes these shifts - read about it here(graph of market forces and market clearing price to follow - to be included (19 September 2015). (18 Sept 2015) Allright now we have supply curves and demand curves - it still does not tell us how the price of a particular product gets established on a market, in short the answer is that it is the result of thee interplay between the forces at work on that market. Let us take a situation where a particular price is reigning on a market. (If we say reigning, what we really mean is that that was the price at which the last trade took place. Now before we go any further we have to pause a bit and set some ground rules. The ground rules here are the particular conditions under which trade takes place - and to simplify matters we assume what economists call perfect market conditions - now what are these perfect market conditions? They are theoretical constructs not found in real markets, though approximations may exist - such as a stock exchange or a street market may satisfy some or most of the conditions. The important ones are a)that there are many buyers and many sellers and not one buyer or seller (or group) is big enough to be able to exert an influence on the market.b) Entry into the market is free and easy, c)price levels are available for all to see and d) time lags does not exist (this last one does obviously not exist in the real world, though modern electronic markets come pretty close)and e)want to maximise their respective utilities. There are other conditions, and for a more detailed discussion go here. So in this market there at a particular point is this reigning price. This price is depicted as $ 1,50 on the chart below - as you can see we have now combined the previous demand and supply graphs onto one - called the supply and demand system.

Now at this price there is an oversupply, a surplus. What now causes the price to fall is the desire of the entrepreneur to maximise profit (condition d) in the assumptions listed above - rather than not sell the item he would rather drop the price and when the price fall the demand increases at that price point. Similarly at a low price, say $ the purchaser will bid the price up rather than not have the item. So you can see that below the intersection of the supply and demand curve there will be a tendency for the price to go up and above this point there will be the tendency for the price to come down - at this point , which we call the market clearing price there will be an equilibrium between these opposing market forces.

Post 1. Economics

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This website is dedicated to a fuller understanding of Economics.

The original meaning of the word relates to the management of a household. So one can say "Economics is the social science that describes the factors that determine the production, distribution and consumption of goods and services. The term economics comes from the Ancient Greek οἰκονομία from οἶκος (oikos, "house") and νόμος (nomos, "custom" or "law"), hence "rules of the house (hold for good management)".

See: http://www.etymolonline.com/index.php?term=economy I think that that modern academic economists start slipping when they started to view a country's economy as functioning in a fundamentally different way than the economy of an individual household. They recognise this "mistake" - they call this "the fallacy of composition" - the larger economy is somehow different to the smaller unit. This may be so, something that is true for the single case may not be necessarily be true for the whole.
There are however some economic realities that cannot be changed just because we wish it so. For example, something needs to be produced before it can be consumed. A policy of "quantitative easing" for example may soften the effects of a recession but allmost everyone realises that such actions do not create wealth - one cannot spend oneself out of debt, can one? One first has to produce, one first has to earn and then save an so increase ones productive capacity. This is true for individuals, firms and countries.

Lately the notion of first borrowing to obtain the required productive capacity has developed - such a strategy is risky but possible, so the guideline is that if you do have to borrow, one has to do so prudently - this holds true for individuals, firms and countries. One must realise that things can go wrong and then someone still has to pay for it. The Greek government realised this after years of overspending (2012) - For governments it is easy to spend someone else's money on hair brained schemes such as giving home loans to people that cannot afford to repay them (as was done in the US)... or medi-help or free schooling or (fill in anything that people get without fully paying for it themselves). The South African Gautrain project is another one of those ill-conceived schemes - it has to be subsidised by the taxpayer to keep it running. And though lauded as a "success" it is still to be proven to be economical. In other words a worthwhile investment (a worthwhile investment is defined as one that you would have undertaken if it was your money).

When it comes to providing social services to the poor it is better to turn compassion over to people that care - do not force people to care through taxes, voluntary charity will be the moral thing to do. Other people's money is not for you to take just because you won some election. In subsequent pages we will be looking at other issues that affect our economic welfare - from price formation to economic growth.

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