Wednesday, March 4, 2009

Economic Cycles?

This post relates to the following Keystone Economic Principles:
4. Economic systems influence choices.
5. Incentives produce “predictable” responses.
8. Quantity and quality of available resources impact living standards.
and
9. Prices are determined by the market forces of supply and demand…and are constantly changing.

Last week, I posted on an interesting article about bicycles in Paris. The government had provided bicycles for Parisians to use with the intention of reducing automobile traffic and to help people get around. The bikes were available at no charge through an agreement with a private firm. But circumstances were causing the firm to rethink the idea.

Now we have a different story (HT to Izzit). But we travel to Zambia for this story. In this case, a couple of entrepreneurs have set up a not-for-profit and are selling bikes at a subsidized price. The idea is to provide much-needed transportation in this African country - transportation that will allow many to improve their standard of living.

I have a couple questions that you can pose to your students about this.
1) What is different about how the bikes are provided?

2) Does the difference in providing the bicycles create a different incentive structure for the people using the bike?

3) How is the Zambian story an example of application of capital to a developing economy?

If you use this in class, please share your experience. I would think this would be a good example to use when discussing property rights as an institution to help economic development.

1 comment:

Mike Fladlien said...

i think a man wants to earn his dinner and not be fed...i just believe that man wants value from his work...