www.whyville.net Sep 19, 2003 Weekly Issue

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A Lesson in Economics

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New school year means new classes, and this year, I'm taking an economics course. Based on a lot of city hall polls, Whyville citizens don't know too much about the subject, so I figured I'd teach you a little.

First, what is economics? Webster's Dictionary (http://www.m-w.com) defines economics as "a social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services." That sounds quite confusing to me, so here's the simple definition: economics is the study of how the people make money, and what people do with money. Sounds really exciting, doesn't it? I'm sure you're asking what this has to do with you, aren't you?

I'm sure at some point in your life, you've asked the question, "Why can't the government just give everyone money?" Like me, I'm sure you've thought that if everyone just had money, then nobody would be homeless, and everyone would have food. Or on Whyville, I'm sure many of you have thought, "If City Hall just gives everyone a million clams, then nobody would look like a newbie." It sounds like the perfect system, right? Everyone gets money, then everyone is happy. But this is where economics comes in.

What is the first thing you think would happen if everyone had a lot of money? Think about it. Something called inflation will occur. Inflation is basically when the value of the dollar (or clam) goes down. What that means is, you can't buy as much with one dollar (or clam). If everyone has lots of money, then salespeople are naturally going to charge more for their products. If everyone has more money, then of course people are going to charge more to get a bigger profit.

If you're at all like me, you've asked the question, "But why can't you just put a maximum price on things?" To answer this question, I want you to think about farmers. Farmers supply all the basic food for society. If everyone has a lot of money, they can buy lots of food, as long as the price of food stays the same. If everyone's buying more food, what happens to the farmer? That's right, they are working harder. But if prices stay the same, then the farmers don't make as much money per food they grow.

Remember how if there's more money in society, the value of the dollar goes down? If the farmers aren't making money, then they are forced to go somewhere to make money. When this happens, who makes the food? So you see, ultimately, if the government just gives people a lot of money, then that society will crumble into a depression.

Now, let's apply this to Whyville. If everyone was just given a million clams, or whatever, then the prices of face parts will go up. Then what would the point be? If the face parts prices were up, you'd still be spending about the same percentage of your income to face parts. You wouldn't really have more money, because money is worth less. Another point I'd like to make is that Whyville is meant to be a simulation of real life, and in real life, you rarely are just given money to live off of.

I hope I've helped you all understand a little about how the economy works, and hopefully City Hall won't be as bombarded with petitions asking for a million clams.


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