"Malaysia Prime Minister Mahathir Mohamad and the Sultan of Johor are seen in a blue Proton Saga... "When asked whether there is any tension with the sultan, Dr Mahathir said: “No, I don’t see anything because I went to see him and he drove me to the airport. I don’t want to comment on the sultans because if I say anything that is not good then it’s not nice because he is the sultan”"

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Wednesday, November 09, 2005

I hate Robinson Crusoe. And, I think, so does everyone else. He fazes even a legendary graduate student. [Addendum: If anyone understands the stupid model of Robinson in an exchange/production economy, please contact me. And apparently the bastard shows up in Macroeconomic models too - joy!]

"In this economy Robinson Crusoe plays a dual role: he is both a consumer and a producer. Robinson can spend his time loafing on the beach thereby consuming leisure, or he can spend time gathering coconuts. The more coconuts he gathers the more he has to eat, but the less time he has to improve his tan...

Suppose that Robinson is tired of simultaneously being a producer and consumer and that he decides to alternate roles. One day he will behave entirely as a producer, and the next day he will behave entirely as a consumer. In order to coordinate these activities, he decides to set up a labour market and a coconut market.

He also sets up a firm, Crusoe, Inc., and becomes its sole shareholder. The firm is going to look at the prices for labor and coconuts and decide how much labor to hire and how many coconuts to produce, guided by the principle of profit maximization. Robinson, in his role as a worker, is going to collect income from working at the firm; in his role as shareholder in the firm he will collect profits; and, in his role as consumer he will decide how much to purchase of the firm's output. (No doubt this sounds peculiar, but there really isn't that much else to do on a desert island.)...

We're going to think about this problem first from the viewpoint of Crusoe, Inc., and then from the viewpoint of Robinson, the consumer. The discussion is a little schizophrenic at times, but that's what you have to put up with if you want to have an economy with only one person."
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