Thursday, July 9, 2009

Housing Bust in an African Village

I love it when I find a resource that provides me with the ability to introduce and/or explore a multitude of concepts. It provides flexibility for me; with frequent reference, it becomes a baseline resource for the students; and it illustrates how many aspects of economics come together in an otherwise unnoticed event.

That's what I found when I ran across this story

in today's edition of The Wall Street Journal. While the video is interesting, it doesn't do the story justice (a rare occasion when a moving picture is not worth however many words are in the text).

The story in the paper touches on so many topics:

1) Globalization as the housing bust is the result of worldwide rise in commodity prices and the decision by mining conglomerate Rio Tinto to begin mining in the region.
2) Markets, prices and money as the influx of workers creates decisions among the villagers to first barter for their own homes, and then start charging ever-rising money prices.
3) Entrepreneurship as villagers begin using the money rents to purchase new materials in a speculative effort to meet demand.
4) Business cycle with the boom-bust of the iron-ore market following the global turndown and, in turn, causing falling wages and unemployment.

And I haven't even touched on all the possibilities. This single article offers a myriad of opportunities for integration in the classroom. I hope you'll find it useful. I look forward to your comments, as always.

This post references the following Keystone Economic Principles:
1. We all make choices.
2. There ain't no such thing as a free lunch.
3. All choices have consequences.
4. Economic systems influence choices.
5. Incentives produce "predictable" responses.

8. Quantity and quality of available resources impact living standards.
9. Prices are determined by the market forces of supply and demand… and are constantly changing.

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