Tuesday, October 20, 2009


There once was a one person economy. This person provided all that was needed. He even made enough luxury goods to be very happy. This person would be slightly happier with more luxury goods but his marginal utility diminishes very fast so he would not be very much happier. This person clearly had a strong preference for free time over additional luxury goods. Lets call him Bob.

Fortunately for Bob, one day he learned how to double his productivity. He worked just over half as much as before, produced the same amount of necessities, and slightly more luxury goods. His utility increases dramatically mostly due to the large increase in free time. He used it to go swimming in the summer and snowshoeing in the winter.

Unfortunately for Bob one day he met a politician. Lets call him Mr. McBamabush. Mr. McBamabush told Bob that he would be happier if he had more luckier goods. Bob told Mcbamabush that he gained very little from more goods and enjoyed his free time. Besides all the exercise kept him healthy. Mcbamabush insisted that more good would mean a lot more happiness and that Bob should double his work from part time to full time to produce the goods. Eventually Mcbamabush succeeded in convincing Bob that he would be happier with more goods.

When Bob began to produce more he did gain a little happiness from the additional goods. He lost much more happiness in lost free time. He didn't notice but his doubled work was taxing the environment in an unsustainable way making it unhealthy to live in. Mcbamabush kept repeating the lie and even though Bob was less happy he continued in the belief that he would be more happy with more goods. Eventually due to the degrading environment Bob became unhealthy. In need of health care he came to Mcbababush for assistance. He offered Bob a deal, if Bob gave him half his income he would provide unlmited free health care. Bob was very sick and desperate so he accepted.

Bob went to collect his health care. Mcbamabush gave Bob one free band aid to fulfill his promise of healthcare. Now since Bob was unhealthy he was also going to need help supporting him self in his old age. He new this and went to Mcbamabush for assistance. Mcbamabush offered him a deal. Bob agreed to give him the other half of his income for free retirement.

Time went by and Bob somehow managed to survive on nothing until it was time to retire. He went to Mcbamabush and asked for goods for retirement. Mcbamabush told him that he had to wait 2 more years due to unforeseen difficulties. After two year when it came time for Bob to collect he had a heart attack. Mcbamabush eventually put a band aid on him but it was to late. At least Mcbamabush didn't owe Bob healthcare or retirement anymore.

Mcbamabush went on to other people. He convinced them all that they wanted more than they really did. He took the product of their labor while promising more goods for free. It seemed he had enslaved all the people he ever met.

Luckily for the people this story is not over. You see Mcbamabush never changed the peoples utility functions. He only convinced them that a foreign utility function belonged to them that did not. He did not actually change their preferences but confused them .The laws of the utility function still govern them as the laws of physics and when they rediscover them Mcbamabush is in for a real surprise.