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60 second adventures in economics number
one the invisible hand an economy is a
60 ضركة سةركيَشي لة زانستي ئابووريدا يةكةم ئابووري و دةستي شاراوة بريتية
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tricky thing to control and governments
are always trying to figure out how to
لة شتيَكي ئالَؤز بؤ كؤنترِؤلَكردن و حكومةتةكان هةردةم هةولَي ئةوة دةدةن كة لةوة بطةن كة
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do it back in 1776 economist Adam Smith
shocked everyone by saying that what
ضؤن ئةنجامي بدةن. لة سالَي 1776 ئابووريناس ئادةم سميس سةري هةموواني سورِماند بةوةي كة طوتي
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government should actually do is just
leave people alone to buy and sell
ثيَويستة حكومةت بةتةواوي ئةوة بكات كة واز لة خةلَك بهيَنيَت بةوةي بة ئازادي
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freely among themselves
لةنيَوان خؤيان هةلَسن بة كرِين و فرؤشتن.
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he suggested that if they just leave
self-interested traders to compete with
ثيَشنياري ئةوةي كرد كة ئةطةر خةلَكي بةسوودي كةسي خؤيان هةلَسن بة ئالَوطؤرِ بؤ كيَبرِكيَ كردن
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one another
لةطةلَ يةكتر
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markets are guided positive outcomes as
if by an invisible hand if someone
بازارِةكان بةشيَوةيةكي دةرئةنجامي ئةريَني ئاراستةدةكريَن كة ئةويش لةرِيَطةي دةستي شاراوة. ئةطةر
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charges less than you customers will buy
from them instead you have to lower the
كةسانيَك لة تؤ داواي نرخي كةمتر بكات ئةوا كرِيارةكان لة ئةواني تر دةكرِن لةجياتي تؤ ئةوةش بؤ نرخي
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price or offer something better
نزمتر يا شتيكي باشتري ثيَشنياركراو دةطةرِيَتةوة.
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whenever enough people demand something
they would be supplied by the market
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like spoiled children
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only in this case everyone's happy later
free marketeers like Austrian economist
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Friedrich Hayek argued that this
hands-off approach actually works better
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than any kind of central plan
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but the problem is economies can take a
long time to reach their equilibrium and
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may even stall along the way and in the
meantime people can get a little
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frustrated
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which is why governments usually end up
taking things into their own more
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visible hands instead
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number two the paradox of thrift
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much like a child getting his pocket
money one of the biggest economic
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questions is still whether it's better
to save or spend free marketeers like
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Hayek and Milton Friedman say that even
in difficult times
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it's best to be thrifty and saved banks
then channel the savings into investment
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in new plant skills and techniques that
let us produce more and even if this new
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technology destroys jobs wages will drop
and businesses hire more people
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so unemployment falls again simple at
least in the long run but then a live
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fast die young kind of chap called john
maynard keynes cheerfully pointed out
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that in the long run we're all dead
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so to avoid the misery of unemployment
the government should instead spend
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money to create jobs
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whereas if the government tighten its
belt when people and businesses are
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doing the same
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les is spent so unemployment gets even
worse that is the paradox of thrift
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so instead they should spend now and tax
later when everyone's happy to pay
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though making people happy to pay tax
for something even cannes didn't solve
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number three the Phillips curve bill
phillips was a crocodile hunter and
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economist from New Zealand who spotted
that when employment levels are high
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wages rise faster
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people have more money to spend so
prices go up and so does inflation and
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likewise when unemployment is high the
lack of money to spend
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means that inflation goes down this
became known as the Phillips curve
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government even set policy by the curve
tolerating the inflation when they spend
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extra money creating jobs but they
forgot that the workers could also see
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the effects of the curve
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so when unemployment went down they
expected inflation and demanded higher
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wages courting unemployment to go back
up while inflation remained high which
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is what happened in the nineteen
seventies when both inflation and
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unemployment rose
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then in the nineties unemployment
dropped while inflation state low which
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all rather took the bend out of Philips
his curve but at least part of Philips
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his troublesome trade-off lives on when
faster growth and full employment return
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you can bet inflation will be along to
spoil the party
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number for the principle of comparative
advantage
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whether you think economies work best if
they're left alone or the government's
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need to do something to get them working
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the one thing that can't be controlled
is the rest of the world fear of foreign
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competition once led countries to try
and produce everything they needed and
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impose heavy taxes to keep out foreign
goods
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however economist David Ricardo showed
that international trade could actually
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make everyone better off bringing in one
of the first great economic models
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he pointed out that even if a country
can produce pretty much everything in
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the lowest possible cost with logic on
mystical an absolute advantage
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it's still better to focus on the
product that can make most efficiently
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that sacrifice the least amount of other
good and let the rest of the world do
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the same by specializing they can then
export these surfaces to each other and
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both end up better off
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this is the principle of comparative
advantage and it has persuaded many
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countries to sign up to free trade
agreement but unfortunately it can take
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a long time for countries to trade their
way to prosperity and because it's now
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much easier to move to where the money
is
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it's increasingly not any goods across
borders but people which is somewhat
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uprooted Ricardo's theory
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number five the impossible Trinity most
countries trade with on another which is
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usually pretty good for all involved but
it does mean it's a bit harder for each
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to keep control of its own finances
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there are three things that governments
are particularly keen on
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they like to keep the exchange rates
table so that import and export prices
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don't suddenly jump around
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they also like to control interest rates
so they can keep morrow is happy without
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upsetting savers and they like to let
money flow in and out of their country
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without causing too much disruption but
there's a problem when you try to do all
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of these at once
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say for example the eurozone tries to
lower its interest rate and reduce
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unemployment money flows out to earn
higher interest rates elsewhere exchange
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rates drop which causes inflation
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so the euro interest rate is forced back
up again you can either fix your
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exchange rate and let money flows freely
across national borders but have no
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control of your interest rates or
control your interest in exchange rates
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but then you can't stop the capital
flowing in and out but like an
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overzealous triathlete
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you can't do all three at once
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number six rational choice theory of all
the things to factor in when running an
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economy of the most troublesome these
people now by and large humans are
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irrational lot when the price of
something rises people supply more of it
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and buy less of it if they expect
inflation to go up
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people usually ask for higher wages they
might not get them and if they can see
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interest or exchange rates falling in
one country people with lots of money
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there will try to move it out faster
than you can say double dip and
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governments often decide their economic
policies
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assuming such irrational actions which
would be great if it weren't for the
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fact that those pesky humans don't
always do what's best for them
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sometimes they mistakenly think they
know all the facts or maybe the facts
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are just too complicated and sometimes
people just decide to follow the crowd
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relying on others to know what they're
doing
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when too many cheap mortgages were being
sold in 2007 a lot of people didn't know
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what was going on and a lot of others
just follow the crowd
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some lenders may have rationally believe
that when the crunch came the scale of
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the problem would force governments to
rescue them which was true for the
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bank's if not for all their customers
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