5.4, a model of choice and conflict. Now I'm
going to play a role model today
and I'll be the CORE textbook, the person that
is going to explain everything to you,
and will go through the models.
So let's go to our first model. I need to
introduce
a character: our first character is
Angela. Hi Angela.
ANGELA: Hello. CORE: Angela is an independent farmer. Now, independent farmers are very common
throughout history:
they either work on their own land or
work to produce things on a land which is free,
and that's the case with her.
Now let's look at her production
possibility frontier.
If she does not work at all and have 24
hours of free time, she's not going to produce
any grain, but if she works the whole 24
hours, she's going to produce
12 bushels of grain. Now this
is her production possibility. Now
given this, Angela,
how many hours do you choose to work?
ANGELA: Uhm, given this reality that I face, then I choose to work for eight hours.
CORE: Eight hours. Why? ANGELA: Well,
the way I think about it is that I
like to have plenty of
free time, but I also realize that I have
to work in order to produce grain to keep me
going, and when I balance these two things then
I end up working for eight hours.
CORE: So basically she balances economic reality
with her preferences: at that hours of work, these two things match, and in the jargon of
economics we call this in our model
a place where the marginal rate of
substitution, your preference that exists
in your head,
meets the marginal rate of transformation, an economic reality that exists out
there.
You agree with me?
ANGELA: That sounds like a
reasonable explanation.
CORE: Thank you thank you.
Now let's move on to our next stage, 5.6,
allocations imposed by force. In the
previous section
Angela was an independent farmer and she could choose how many hours to work,
but in this section we go to the exact
opposite extreme:
Angela is now a forced labourer and she
cannot choose how many hours to work.
Her hours of work are basically imposed
and forced on her by a landlord.
Why do we study this model? To better
understand the economics of exploitation
that has happened
throughout history under feudalism
and colonialism. In this section I
introduce a new character, Bruno, who is a
land owner. So let's scroll down.
Now Bruno, under this condition, how do
you think the landlord would behave?
BRUNO: So the landowner, I think, would keep two things in mind.
On the one hand, he will keep in mind
how many bushels of grain Angela can
produce,
and on the other hand he will also keep
in mind the number of bushels of grain
that he needs to pay angela for Angela
to survive, for Angela not to rebel.
CORE: Very good.
And let me just show these two elements
in the grap. The red line is what
Angela produces and this green curve is
the minimum grain that Angela needs to
survive
and not to rebel against the landlord. As you can see, the more she works
the more food she needs, obviously.
Now, the next question is:
at which point the landlord would
maximize his profit?
BRUNO: So that is the point
basically where the difference between
the number of bushels of grain that
Angela can produce
and the number of bushes or grain that
the landowner needs
to pay Angela for her to survive and not
to rebel
is the greatest. So he will choose an
amount of hours of work
such that the difference is biggest.
CORE: Exactly, and if we see it in our graph
that's 13 out of 13
hours of free time, or in other words
that's 11 hours of work
per day. At this point, you see the gap
between what she can produce and the
minimum
that she needs is maximum,
is the largest, the largest amount of
exploitation happens at that point.