Capitalist Economics

Capitalist Economics

On your first day in College Economics Class, your instructor will scribble a big “X” on the chalk board.

He will then explain that one of the lines represents “supply” and the other represents “demand.” As one goes down, the other rises. At their intersection, price and value are magically set. It’s the market he’s drawn. Nothing has any value, he will say, until this “X” process happens. A paper clip might be worth as much as a steamboat until their value is set by the “X.”

If there is time on this first day, he might go on to say that “demand” doesn’t really mean what it means in the dictionary — that somebody wants something. it means that somebody wants something AND can pay for it. “Supply” doesn’t mean the amount of goods available, but just the amount of goods that sellers want to offer. They might hold goods off the market to maneuver the price upwards, because they’ve already seen this “X” and know how it works.

That’s more than profound enough for one day, the professor might say. The magic “X” rule explains everything perfectly, he says. In the rest of your four college years, he will be explaining the exceptions.

Back to: Economics