Economics Explained

Communism vs Laissez-Faire Capitalism

Both of these opposing theories are very extreme and, for what it's worth, don’t exist in any modern economies anywhere around the world today, despite what some nations might have you believe. 

In this episode of Economics Explained, we'll explore the following questions:

So what are the economic arguments for and against a communist economic system? 

What are the economic arguments for and against a completely free market?

Are there any examples of these extreme systems actually working throughout history?

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The bottom line is the most important part of any functioning business.

Profit after costs, expenses, and taxes. 

The money that the founders and investors in companies get to put back into their pockets for the risk and effort they put into a business. 

Sounds like business 101 right? And it kind of is.

A business that doesn’t turn a profit is like a freezer that kind make ice, it’s more or less pointless. 

And sure there are things like non-profit charity organizations out there but most businesses exist to make money!

So why is it that some of the biggest companies in the world are not turning profits? Why is it that they don’t even plan to?

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Inflation is something we more or less take for granted these days. The idea that 5 dollars today is not going to be able to buy 5 dollars worth of stuff in the future, and the fact that you used to be able to buy a family home for 10 grand, are all the result of inflation. 

The idea that over time money becomes worthless and less influences a lot of decisions in out lives. Everything from retirement planning to salary negotiations take this relatively benign and constant force into account. 

But it is something that should be feared. 

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Inflation is something we more or less take for granted these days. The idea that 5 dollars today is not going to be able to buy 5 dollars worth of stuff in the future, and the fact that you used to be able to buy a family home for 10 grand, are all the result of inflation. 

The idea that over time money becomes worthless and less influences a lot of decisions in out lives. Everything from retirement planning to salary negotiations take this relatively benign and constant force into account. 

But it is something that should be feared. 

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This is Taiwan, or officially, the Republic of China, a country in east asia, which if you can’t tell by how delicate I am being with these titles here is consistently under a bit of ehh let’s call it scrutiny. 

So contentious in fact that any country that is doing business with the people's republic of china, you know China, has to officially declare that they recognize the island of Taiwan as the sovereign territory of China.

While this is all very confusing, the fallout is that the nation of Taiwan is only officially recognized by a tiny selection of countries from around the world. 

These countries include economic superpowers like Guatemala, Haiti, the Marshall Islands and Vatican city collectively making up only accounting for around 50 million people and covering a tiny portion of world trade.

So it's not exactly like they have brought their A team.

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GDP is one of the most universally recognized terms in economics. Even outside people with an interest in the subject most adults would be able to tell you that GDP is a measure of how large an economy is.... But they might not be able to tell you how it’s calculated, or even what it stands for.

In this episode of Economic Explained, we will explore the following questions:

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The Fire movement is a growing trend amongst young workers which is growing in popularity thanks to its very enticing goal which is spelled out in the name.

FIRE is an acronym of Financial Independence and Retiring Early. 

The idea is that by following a very aggressive saving and investing strategy people can get to a point where they are effectively retired at a very young age, sometimes younger than 30. 

Getting to that point is harder for some than others, but advocates of the movement argue that this difficulty has more to do with personal lifestyles rather than personal incomes. 

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Workers today are amongst the hardest worked individuals in history, while simultaneously being the most efficient. 

Sure, they have traded in grueling factory floors and coal mines for air conditioned offices so they probably don’t get quite as much sympathy as their industrial revolution contemporaries but the world today is marred by different challenges.

Hustle culture and the glorification of roles like surgeons, investment bankers, and corporate lawyers have set a precedent of on-call all the time, under the guise of professionalism or being a team player.

Expectations and key performance indicators are increasingly monitored, scrutinized, and increased year on year. 

Now the discussion around overworking is not a new one, but it tends to focus on the mental health implications of this reality rather than the economic impacts. 

Now we are going to be leaving that aspect of this discussion to the side for this video and instead focus just on the economics of the overworked world.

Partially this is because there are many people far more qualified to talk about mental health and partially because well, sometimes for things to get changed it needs to make economic sense for them to be changed. 

So the health implications of 100 hour weeks aside, we really only need to answer one question. 

Does people working longer and harder make for a more prosperous economy? 

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The economic impacts of 2020 have been felt far and wide and we have covered these problems in-depth in a handful of videos on this channel. But the logical question that most people are asking is what comes next? 

Disasters happen and they are never pleasant but part of being a nation, a business, or even an individual is being able to deal with adversity and come out the other side. Because of this people are expecting a recovery of sorts, and it seems like the only point of contention will be what letter of the alphabet this recovery will represent.  

Other speculations include a W-shaped recovery where we will see 1 recovery then another decline as the effects of government stimulus and relief packages wear off only to be followed by another genuine recovery later on.  

But amongst all of this, there is one type of recovery that we should all be very afraid of, one that is not getting nearly as much airtime and one that is actually being hurt by a lot of current policies and that is a K shaped recovery.

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Economics is considered a social science, and although some other scientists from more “rigorous” fields don’t always welcome it into their little club, it still follows the same processes to explore the world around us.  

And, as with science, or anything that is extremely complex for that matter, there are disagreements between practitioners at all levels of academia and throughout the entire history of the subject.

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