What is the bullwhip effect? The bullwhip effect is where a small change in consumer spending can lead to a very large fluctuation down the supply line. It is one of the causes of overproduction and waste. It is called the bullwhip effect because a small flick on the handle of a whip can lead […]
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What was the gold standard? The gold standard was a system that tied the value of a country’s currency to a fixed amount of gold. It is often said that it ended in 1971, because that was when the United States stopped converting dollars into gold for foreign governments and central banks, which was the
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What is the Laffer Curve? The Laffer Curve is a graph that shows the theoretical relationship between the amount people are taxed and the amount of revenue the government can expect to get. The amount of revenue is zero when people are taxed 0% or 100% of their income, and it rises to an optimal
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What is the tragedy of the commons? The tragedy of the commons is the idea that if anybody can use a finite resource as much as they want, they will usually overuse it and destroy it. That is human nature. The common that the tragedy of the commons refers to is common land that most
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What is antitrust? Antitrust is a set of laws that are supposed to promote fair competition and prevent monopolies. You have probably heard the word “antitrust” a lot since the birth of the giant tech industries. It is always being used to refer to Microsoft, Google, and Facebook (sorry – Meta). But, what actually is
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Who is the richest person ever? This is an incredibly difficult question because society and economics were vastly different in the past. Still, Mansa Musa is often said to be the richest person who ever lived. The richest person today is Elon Musk, although his wealth fluctuates wildly. At its peak, he was worth $425
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What is Boots theory? Boots theory is a theory that poor people have to buy low quality products that don’t last very long. This means they have to replace them often and end up spending more in the long run than they would have if they had been able to buy a more expensive product.
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Why was there a tulip bubble? There was a tulip bubble in Holland and across Europe in the 16th century because tulips were rare and because people didn’t want to lose out on an opportunity to make money. The tulip bubble, also called tulipmania, is a good showcase for human nature. It shows how people
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What is a hedge fund? A hedge fund is a pool of money invested by private individuals. Their money has more power together than they each would have individually. The expression “hedge” fund came about in 1949 and the word “hedge” was used to imply that the fund was hedged against risk. That means that
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What is a Ponzi scheme? It is a type of fraud where you use money invested by new people to pay profits to the people who are already invested. It was named after Charles Ponzi who certainly didn’t invent the scheme but who made it famous. (Incidentally, Ponzi scheme, scam, and con are all relatively
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