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| | Finally, imagine a regulator imposing price controls on a natural monopoly. Forcing P = MC for a natural monopoly, however, would require a subsidy by the government if ATC > P. Without a subsidy, the company shuts down. Alternatively, if regulators set P = ATC for the natural monopoly, it does not need a subsidy but it is not producing an optimal output Q. Government price controls are almost never desired from an economic perspective. However, they may be popular politically. | | Finally, imagine a regulator imposing price controls on a natural monopoly. Forcing P = MC for a natural monopoly, however, would require a subsidy by the government if ATC > P. Without a subsidy, the company shuts down. Alternatively, if regulators set P = ATC for the natural monopoly, it does not need a subsidy but it is not producing an optimal output Q. Government price controls are almost never desired from an economic perspective. However, they may be popular politically. |
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| | + | == Adversity and Suffering == |
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| | + | Some concepts in economics are surprising, as as some teachings of Christianity are surprising the first time. An example is that difficulties can actually be blessings. Consider how a tree grows. |
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| | + | A tree starts out as a tiny seed with apparently little chance of survival. It must find nourishment deep in the soil, and it must defy gravity by growing towards the sky for sunlight. Typically no humans help it. The tree has to make it on its own, and deal with tornadoes, hurricanes, and hostile animals. The tree never “owns” anything. |
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| | + | Tree limbs are very heavy, to the point of crushing houses or killing people when they do fall. The tree has to raise and support its heavy limbs against gravity. The flow of a tree’s nutrients is also against gravity. Trees grow in unexpected places, and sometimes around pre-existing obstacles. Out West roads have even been cut through trees, and they still survive and thrive. |
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| | + | Yet the difficulties in surviving are what make a tree strong. Each day it grows in two directions: downward further into the soil towards more nutrients, and upwards into the sky towards more sunlight. Its growth is not easy in either direction. The more it has to reach for nourishment, the bigger and stronger it becomes. Trees that are given their nutrients, as in a laboratory, do not grow as large and powerful as trees that must struggle to survive in the wild. |
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| | + | It is in striving against obstacles that the tree becomes so powerful. Economics predicts that those who suffer from adversity will often become more successful or productive than those who have it easy, just as is true for trees. The adversity is what makes one stronger, more motivated and more efficient. Many of the most successful businessmen in history had very difficult childhoods, and some (like Tom Monahan, founder of Dominos Pizza) even grew up in orphanages. Poverty was the common background of most successful businessmen. In contrast, people who have had it easy rarely invent or succeed with their own businesses. |
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| | + | The Bible contains a similar message: it is through suffering and difficulties that Christianity became so strong. Many books in the Bible emphasize this, from Daniel to Mark. Learn to use adversity like an exercise bicycle or weights in order to make you stronger and more successful economically. |
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| | + | There is a Latin phrase: "nitor in adversum." It means "strive in opposition." It's a good motto. |
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| | ==ASSIGNMENT== | | ==ASSIGNMENT== |