Pur Autre Vie

I'm not wrong, I'm just an asshole

Monday, July 04, 2011

Progress and the PPF

The production possibility frontier is an important concept in economics, but I would like to apply it a bit more broadly. First, a quick explanation.

The idea of the production possibility frontier is to chart a line showing the trade-off between two goods. For instance, imagine that a society must choose between defending itself (guns) and feeding itself (butter) (this is of course a classic example). One might put a point on the y axis describing the output of guns if the society puts every possible spare resource into gun production, and a point on the x axis describing the output of butter if the society puts every spare resource into butter production. Then one connects the points with some sort of line or curve, describing every combination of production of guns and butter that could potentially be achieved by the society (hence the name production possibility frontier).

So far so good. But a society may be operating within its frontier - that is, producing less of both guns and butter than it theoretically could. This may be because of bad social policy (too high a minimum wage, say).

Now, to extend this beyond economics, think of the two kinds of policy changes one might want to effectuate. One is a movement to the northwest or southeast - that is, trading away one good for another. Another is a movement to the northeast (or, I guess in theory, the southwest) - an improvement in the production of both goods.

And you can put almost anything on the axes. It could be redistribution vs. economic growth, or environmental protection vs. economic growth, or whatever. "Centrists" tend to search for policies that are "non-ideological" or "non-partisan" in that they eliminate waste and move us to the northeast (toward the frontier) (of course, one still has to choose whether to move more north or more east - ideology can never be eliminated entirely). "Partisans" deny that there are any "easy answers" and want to trade away one good for another (move to the southeast or northwest).

I don't have much more to say than this - I just think it's a useful framework for thinking about political issues. You should ask yourself, "Would it be feasible to move toward the frontier, or will any gains for my side come at the expense of the other?" But it's also important to remember that moving toward the frontier may be all but impossible (which effectively means that we are at the frontier, given what is under our control). This arises when some group can block any efficiency-enhancing measure that threatens its interests.

3 Comments:

Blogger Sarang said...

the ppf can go fuck itself.

perhaps the ultimate "goal" of society is not to make stuff?

9:55 PM  
Blogger James said...

I mean, it doesn't have to be goods. It could be anything. The point is allocation of resources, and that can be read broadly. The PPF might not add much to the analysis, but at least for me it clarifies my thoughts about centrism vs. partisanship.

11:25 PM  
Blogger Sarang said...

Right, drunk comment. I think the main problem with this model is one of oversimplification, i.e., throw in enough variables and basically every possible position involves a move toward the axes along some direction. I.e., very little politics can be done by dominance reasoning.

12:43 PM  

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