The ultimate doom and gloom scenario.

tomstickland

Is it possible for the whole economy to topple over?

What if loads of people lose thier jobs, tax income falls right down, welfare state costs increase, along with all the money borrowed over the last few years.
Could it become totally unworkable, and we end up loss of public services, people scavening for food, and anarchy etc?

How could the govt try to stave this off? Would it be more borrowing or can they magic up non existant money by printing it?

ray123

No. We are not in zimbabwe.

globalds

tomstickland wrote: »

Is it possible for the whole economy to topple over?

Not in the sense that it would stop .
It would just find a new level .

tomstickland

Why not?
What will happen as tax income falls and spending requirements rise?

What if this happens at the same time as multilple strikes causing loss of public services, people don't get paid etc etc. Didn't some things like this happen in Russia in the last decade?

globalds

If you look around it is pretty obvious we are a developed country ..Most of what we do is administration .We would just reduce the level of services we provide to ourselves .
Less spending on Schools ,Hospitals ,Police Armed forces before you know it were not bankrupt ..we just have high crime and poor education

tomstickland

What relevance does being developed have?
There's a lot of unwritten assumption in your thoughts. I think you assume that I have an agenda here. I don't, other than pondering how an economic system works and what the limits of it are before it goes unstable, or has any other mathematical states.

globalds

In simple terms a developed society has the same problems with value as a person does .
If I have no computer in my home ..Then purchase one .The added opportunity this provides is pretty big .Should I wish to upgrade my machine or buy another ....The added value is not so great .
The same with a country .If I rebuild a hospital rather than build a new one ,there is a lot less society perceives to gain .
A good book on the vagaries of economic activity is this
http://www.amazon.co.uk/Origin-Wealth-Evolution-Complexity-Economics/dp/0712676619
The origin of wealth .

WTF?_2

globalds wrote: »

If you look around it is pretty obvious we are a developed country ..Most of what we do is administration .We would just reduce the level of services we provide to ourselves .
Less spending on Schools ,Hospitals ,Police Armed forces before you know it were not bankrupt ..we just have high crime and poor education

... yeah, but what would actually change?

globalds

To go on with my (probably) poor analogy .we would go back to being a home that shared a computer ,rather than having the luxury to have a personal machine .
We are talking about a reduction in (To a certain extent )Luxuries as opposed to actual hardship .

Microstar_2

The government will just borrow a little more. UK public debt is not actually too bad (despite all the hysteria in some newspapers and on this board). UK public debt hovers a little over 40% of GDP, which compares very favourably with many other major economies (Japan sits at almost 200% !!). For more information see:

http://www.statistics.gov.uk/cci/nugget.asp?id=206

http://en.wikipedia.org/wiki/List_of_countries_by_public_debt

tomstickland

globalds wrote: »

In simple terms a developed society has the same problems with value as a person does .
If I have no computer in my home ..Then purchase one .The added opportunity this provides is pretty big .Should I wish to upgrade my machine or buy another ....The added value is not so great .
The same with a country .If I rebuild a hospital rather than build a new one ,there is a lot less society perceives to gain .
A good book on the vagaries of economic activity is this
http://www.amazon.co.uk/Origin-Wealth-Evolution-Complexity-Economics/dp/0712676619
The origin of wealth .

I started this thread as a bit of random thought about how an economy works. I've been off thinking for a while and realised that I need to start with some much more basic models and build my understanding of those. Basically I need to self educate myself in basic economic theory. I think I'll find it really interesting, since I do loads of applied maths at work.

For example, if I created an island with a set number of inhabitants and gave them a certain amount of money to exchange for goods, what would happen?
Initially they'd use the money as tokens of a nominal value. They'd exchange these tokens to facilitate their daily life.

Now imagine that one of these inhabitants grows a new crop that is more valuable than other crops, and gradually accrues more tokens. In this closed system this then means that the other inhabitants have less tokens per head. So in this simple model the wealthy cause others to be poorer.

If we now create a government, and they tax economic activity. Some of this is used to pay their own employees and some of it is used to support those unable to work.
From first principles it's not 100% yet what the various things that happen are. Money that's given to those who need support, as long as it's not accumulated, it works it way back into the general system to pay for goods.

Anyway, I'd love to create some basic models like this to just question what the basic implications of various things are.