What is the purple software mentioned in Old Ford?

The conflict between cattle and wheat. The farm on the left raises cattle and the farm on the right grows wheat. Cows have to cross the guardrail to eat wheat. Should they be stopped?

The second situation

Fight for the sunshine. There is a hotel with a sunny swimming pool, which attracts many guests. But another hotel wants to build another tall building there. If building a high-rise building will block the sunshine of the swimming pool and affect the income, this hotel will sue another hotel.

The third situation

Whose responsibility is it? Many new railways in the United States come from the expropriation of farmers' land. Farmers think that the land next to the railway is theirs, so they bask in wheat beside the railway. When the train passed by, the sparks from the train wheels and tracks burned the wheat, so the farmers sued the train company.

If you were the judge in these three cases, what would you say?

This involves many problems, and we can solve this problem with a theory of economics, namely Coase's social cost theory.

Coase's theory: make a simple hypothesis in so many seemingly complicated situations. If these two things belong to the same person, what will the following person do?

The first situation: when the cow and wheat belong to the same person, will he let the cow eat this wheat? This becomes a very simple economic problem. How much can a cow sell after eating wheat? How much can wheat be sold without eating it? It's easy to get the answer if you figure this out.

The second case: the conflict between the swimming pool and the tall building, only how much profit can be brought by building a tall building, and how much impact will it have on the hotel if the sunshine of the swimming pool is blocked?

The third case: the handling method is relatively simple. Try to persuade farmers not to bask in the wheat beside the railway and negotiate with the burnt wheat.

From the perspective of social cost theory, if all people are regarded as the overall interests of the big society, all cases will become very simple economic cases.

Under the assumption that the transaction cost is zero or low enough, all the property rights belong to the same person, or the transaction cost between them is particularly low, such as selling the cow to the owner of that wheat, or selling the wheat to the owner of the cow. No matter who the original owner of the resource is, the resource will flow to the most valuable use.

A story about a prison camp

In the prison camp, many economic phenomena and theories will be fully revealed, which will produce very market-oriented phenomena.

One of the most extreme examples is that a priest is holding a piece of cheese and five cigarettes in his hand, and then walking around the prison camp with an extra loaf of bread in his hand, and nothing else is missing. This is a function of typical businessmen in society.

For example, in a prison camp, transactions will be made in some fixed places, and then the price will be written on the bulletin board. Shortening is a price distortion caused by time or geographical factors.

Then there will be interesting price fluctuations, such as bread, which is delivered twice a week and on Monday and Thursday, and then the price of bread will soar the night before each bread delivery, because everyone basically ate it the night before. So the high price of bread is on Wednesday and Sunday nights. Then when new bread comes on Monday and Thursday, the price of bread will drop again.

In the prison camp, there will also be spontaneous money, such as cigarettes mentioned just now. Use cigarettes to measure the value of everything, for example, a loaf of bread is worth two cigarettes.

After money is produced, services will also be produced accordingly. Many people will provide services such as washing clothes and drawing portraits. In this prison camp, a relatively effective economy has gradually formed, and at the same time, bad money will drive out good money.

For example, cigarettes, some people will take inferior cigarettes as good cigarettes, and gradually more and more people will also trade inferior cigarettes.

At the same time, there will be inflation and deflation in prison camps. When you are attacked by air, everyone will finish smoking and deflation will happen. Then, if a new batch of cigarettes comes outside, there will be inflation and the corresponding price will drop sharply.

Under the background of centralized control of prison camps, some new market systems have actually emerged, which are in line with some systems produced by economics and are also very interesting phenomena.

In fact, economics comes from life, and many theories can also be applied to all aspects of life. I hope everyone can experience the fun brought by economics.