What is Economics?

As long as we have been social creatures, and interacted with each other, economics has existed – for, as long as there have been two people on this earth, one has wanted something from the other, and deemed it detrimental to their own survival to take it by force. It is for this reason that it is the oldest of all sciences: as long before man looked to the stars above, or wondered at the motion of objects, or the categorization of the flora and fauna they saw, he tried to make a profit from his fellow man. Economics can be seen as an extension of human psychology, as both sciences study, essentially, the same thing: how men act, and what drives them to do so. More precisely, it can be defined as the study of trade and commerce.

OK, so why should I care?

In the developed world, our lives are dictated by the ebb and flow of economies, and as we pick ourselves up from the scourge of a Zombie Apocalypse, an understanding of this vital science will be essential to our survival as a complex species and our return to the capitalist system we have today. Following a global zombie outbreak, with complete collapse of the government, several small 'states' will emerge over the following years. These 'states' will eventually develop their own unique characteristics, populations, political persuasions, personality traits and roles in an economy (for example, some may be near coal reserves and become miners, or live near areas of fertile land and become farmers). As a people, we require the support of many others to survive and live the way we do (and have done for thousands of years), which is facilitated by the trading of products we have for products we need (at the most basic level) - this is why an understanding of how economics works is vital to survival after Z-Day.

Economics happens on several different levels, normally dictated by relative population sizes. This is evidenced by the fact that many of us in the developed world are unfamiliar with the ancient system of barter and the direct trading of goods, and those in the third world lacking a stable currency marvel at the ways in which we live - the different types of economics are as follows:

1. Local Economics
   

Local economics is economics on a strictly local scale. In other words trade and commerce within one 'state' without any foreign interference.

This is Average Town.

They have a medium sized farm, an averaged size population of 100 people and an averaged size coal reserve.

Each day they produce 100 coal units and 200 food units. Each person needs 2 food and 1 coal each day to survive.

The town can be described as autarkic, which means it is entirely self-sufficient.





Allright, I'm going to fire two definitions at you now: Supply and Demand.

Supply: This is how much there is available of a certain resource. Supplies are always limited.
Demand: Demand is how much of a certain resource is desired. Demands are always infinite.

There will always be a limited supply; there will always be an infinite demand. All leaders must realise this as they attempt to satisfy the infinite demands of their people.

Par example; returning to Average Town each citizen needs 2 food and 1 coal per day for survival, undoubtedly the people will desire more. This is known as the Basic Economic Problem, there is no solution to this problem either as desires are infinite!

That is why you should care and why you need to make sure your people are at least partially satisfied.

Allright, I got that, now how do I work a local economy?

Thankfully for you, local economies are by far the easiest to manage. The next section is when things start getting rough, so please take your time reading it and don't be afraid to read sentences a few times to make sure you understand.

The fundamental principle of economics within a local system without a currency is bartering. This is the exchange of goods or services for goods or services of a roughly equal value. For example; Average Town has 200 food and 100 coal produced every day. The town is composed of fifty farmers and fifty miners. These two factions co-operate on a mutual basis freely trading goods at a fixed rate.

200 food / 100coal = 2.00 exchange rate.

Or, in other words, 2 food is equal to 1 coal. This works out well as each citizen requires 2 food and 1 coal each day. A stable market has formed.

OK, simple enough, but what happens if there is a change in the amount of food or coal produced?

This is where economics gets complicated; I'll present us with an example problem;

There is a major famine in Average Town; half the crop has withered and died. Only 100 food was harvested!

Two main problems are immediately obvious:

1. There isn't enough food to give everyone the desired 2 food a day.
2. The exchange rate will have been altered.

100 food / 100 coal = 1.00 exchange rate.

Q.)Which of the two factions is at the disadvantaged position in economic terms?

Take a couple of minutes to think this through.









The dropped exchange rate puts the miners at a disadvantage in economic terms. The coal is now equal in value to the food.

The miners can now take several options to resolve this problem:

• Trade coal at the decreased rate of 1:1 and let everyone in the town go slightly hungry for one day.
• Trade coal at the usual rate of 2:1 by artificially setting it. This option will not work however as the farmers would not forsake their food, 99% of people would rather go a bit cold for one day than starve themselves for one day.
• Store half of the coal thus fixing it at the rate of 2:1. 100 food / 50 coal = 2.00 exchange rate. The farmers won't give up food at this exchange rate as it is the same problem as in the previous bullet point. This option will also lead to complicated events later on such as, "who goes without coal?" and "On the next day of trading what is done with the excess coal? Will the price of coal be deflated due to excess supply over demand?"

OK, skip forward 7 days. The economy has been restored, the miners opted for the first bullet point. The community went slightly hungry, but recovered. They then expanded the farmland, increasing the potential amount of food available to 300.

However, the amount of farmers available means only 250 can be harvested each day.