Some Economic Riddles

by John Maher

Here are some riddles designed to cause you to examine the nature of economic science. How do you think an economist would respond to the following:

• America, with 5% of the world's population, consumes 25% of the world's energy. Thus our consumption, in percentages, is five times our population. Therefore, if China, with 25% of the world's population, is to reach the American level of production, China will have to consume 125% of the world's energy. Do you agree with this inference? Why or why not?
  
  
• In the U.S. today, the dollar is worth only about five cents.  Can this be true?
  
  
• In the West there is an old saying: "A bird in the hand is worth two in the bush." What does this mean? Is the saying correct?
  
  
• Another saying in the West is: "Whatever is worth doing at all is worth doing well." Is this good advice?
  
  
• Some people have said that, if the central government borrows a great amount of money, this borrowing will be inflationary. What do you think and why?
  
  
• "If at first you don't succeed, try, try again." This is another proverb in the West. Does this proverb give good advice?
  
  

Economic Riddles—Answers

• Of course, no nation will ever consume 125% of the world's energy. Technological improvements, population controls, conservation, political efforts, and other measures will lessen the ratio of energy use to population. However, there are grave problems suggested by the statement, especially as economic development degrades the air, water, and land.
  
  
• Unless an historical base is provided, the statement is meaningless. Thus, it may be true, for example, that a dollar today will buy only one-twentieth of what it would buy in 1950. Then the statement is true with respect to the year 1950.
  
  
• A bird in the hand is worth two in the bush only if some or all of the following apply: the birds in the bush cumulatively are smaller; the discount rate is not too high; and the birds can be captured without much cost. The example is comparable to the question whether you would prefer $100 today or the opportunity to have $110 a year from now.
  
  
• Bad advice! How many of us are prepared to become competent in sports, study, music, gambling, etc.? Are we to stop spending our time on everything we cannot do well?
  
  
• Bad idea! Borrowing is deflationary. It is spending that is inflationary. Borrowing takes money from the lender that, presumably, the lender might have spent or have loaned to others who would spend. See A.P. Lerner, The Economics of Control.
  
  
• Bad advice, generally! After one or two attempts, perhaps I should stop trying to make a fortune on the NASDAC, and get a real job. And maybe I can never beat the Chinese at ping-pong, so I should stop trying!