The general theory of economics: a desert island allegory


This short allegory attempts to understand a simple economy and how investment, inflation, growth are affected by banditry and taxation, the existence of money, and the financial sector. I attempt to show how the schools of economics (classical, Keynesian, Austrian, and Georgist) can be considered part of a general economic theory, that is surprisingly simple to explain and understand. This is relevant to anyone interested in how the economy works, and can be made to work better, giving our society greater real wealth and more freedom.

PDF version here


The Desert Island Economy
Consider a desert island with some farmland, a small wood, and two men: a farmer and a toolmaker. The farmer (Adam) spends all his available time farming. He tills the soil with the tools he has, and, as they wear out, he replaces them, by trading with the toolmaker. He produce a range of foodstuffs including growing apples in his orchard (to simplify we will refer only to apples as the primary unit of food). The toolmaker (Fred) harvests his wood sustainably to manufacture a steady supply of wooden tools, and then trades with the farmer to obtain food. Both have enough food to survive, but there is no surplus to invest.

Fukushima Meltdown -- The Worst Case Scenario

I have been speaking about the ongoing Fukushima nuclear power saga. It may be necessary to consider in detail the worst case scenario for the plant, which could transpire in the next few days.
  1. The operators fail to cool the reactors;
  2. The fuel and fuel cladding melt, creating a radioactive magma;
  3. The fuel magma melts through the bottom of the reactor vessel;
  4. The magma hits the concrete, and causes chemical explosions which lifts some of the magma into the air;
  5. The magma contaminates the immediate vicinity of the reactor; making the site unusable. Lower levels of radiation contaminate the nearby area (land or sea depending on the direction of the wind).
To prevent this, the reactors need to be cooled which means that water needs to be pumped into the reactors. It is essential to get power to the remaining pumping equipment.

This means:
a) A sufficient power source (e.g. a grid connection or sufficient diesel generators - there should be others on the site)
b) Sufficient diesel to power those pumping devices (this could be shipped in by helicopters).
c) Sufficient pumping power is needed (fire engines may not be sufficient - the other reactors on site that are closed down could surely be used in some way).

Furthermore, actions need to be taken to prevent further explosions and build up of pressure in reactor core.

If this eventuality is not prevented, it would be a level 6 accident on the 1-7 nuclear accident scale. It would lead to a one-off release of radiation; but not an ongoing release such as happened at Chernobyl (level 7). The immediate site would be contaminated. Further contamination would depend on the wind direction. It would not however lead to major loss of life or health risk beyond those in the near vicinity.

Difficult decisions need to be made for personnel, such that they are rotated and monitors such that life-threatening levels of radiation are not received; and that individuals past a childbearing age are used, because of the risk of infertility.

The worst case scenario is probably 50% likely at the present time. To stop it (if that is possible at present), heavy pumping equipment needs to be used to pump water into the core (its not clear whether the fire engines used are sufficient). The main consequence of the worst case scenario would be possible injury to the people engaged in trying to prevent it. To prevent this, their radiation needs to be monitored.
 
A clear chain of command needs to exist, and decisions need to be taken promptly, with knowledgeable people in charge, under advice from the designers at GE. It's not clear whether a more serious accident than has happened already is avoidable.

There will be lessons to be learned from this accident. Despite this worst-case scenario (lets not forget this was one of the 5 biggest earthquakes of the last 100 years, and the reactor was built in the early 1970s, without the passive safety systems in modern designs) the main people at risk from death or injury are those who are bravely battling the nuclear problem. In terms of objective measures such as lives lost or loss of life expectancy, nuclear energy remains one of the safest energy sources available.