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Guns, butter, cricket
published: Monday | March 19, 2007 <DIV class=KonaBody BdUr0="true">
Stephen Vasciannie
Economists used to talk quite a bit about the production possibility frontier, and probably still do. The production possibility frontier is a fancy term for the idea that an economy has limits: it shows, in the form of a simple diagram, that the level of production in an economy is subject to an upper limit, the frontier.
The idea goes a little beyond that: It also shows that policymakers can make decisions about what is to be produced in an economy, but that these decisions are still subject to limits. During the Cold War, the Soviets had a clear conception of this basic economic truth. You can have guns, but the more guns you have, the less butter you will be able to produce. And, conversely, the more butter you produce (for consumption), the fewer guns you will be able to produce (for capital purposes).
I've thought about the concept of the production possibility frontier recently in light of some of the criticisms that have been advanced concerning the staging of the Cricket World Cup in the West Indies. The critics, some of whom have taken an unduly simplistic view of the issue, seem to be saying that we should not have had the cricket series here because the money to support the cricket could have been spent on other, more useful, projects. And, starting from this position, some of the critics then try to throw cold water on the entire World Cup competition.
At a very basic level, the production possibility frontier concept would tell us that if you spend a lot of money on cricket, then you will have to spend less on, say, education. Given that there are limits to your economy, then expenditure in one area represents an opportunity cost with respect to other areas.
The criticism that expenditure on cricket will reduce expenditure in other areas is therefore an obvious point. It is the kind of point that one expects opponents to make in a high school debating competition: it is correct as a matter of arithmetic. It is, however, unduly simplistic to leave the matter there.
Cricket World Cup expenditure
In the first place, the expenditure on Cricket World Cup is substantial, a sacrifice in small, resource-starved economies. But, we should note that it will not be substantial for a significant period into the future. The main expenses incurred by the Caribbean states in connection with the cricket have been for infrastructure such as the construction or renovation of stadia, and for the improvement of roads. These expenses will not be incurred at the same level next year and so on. Thus they may seem high when looked at as one-time expenses, they are considerably less if considered over a longer period of time.
Second, in assessing the value for World Cup expenditure, we should look at the matter over the long term. The aforementioned infrastructure put up or improved for World Cup Cricket will not evaporate when the competition comes to an end. The improved Sabina will remain, as will the new Trelawny complex, this is value that cannot be assessed simply by reference to one competition. As for road improvement, the expenditure is easily justified as part of long-term development, quite independently of whether or not we are staging the World Cup.
There is another point to be kept in mind here. The production possibility frontier idea only tells us that if you spend on guns, you reduce your capacity to spend on Y. It does not tell us about other aspects of the relationship between spending on X, as against Y. But economies are characterised by many points of intersection and many l
published: Monday | March 19, 2007 <DIV class=KonaBody BdUr0="true">
Stephen Vasciannie
Economists used to talk quite a bit about the production possibility frontier, and probably still do. The production possibility frontier is a fancy term for the idea that an economy has limits: it shows, in the form of a simple diagram, that the level of production in an economy is subject to an upper limit, the frontier.
The idea goes a little beyond that: It also shows that policymakers can make decisions about what is to be produced in an economy, but that these decisions are still subject to limits. During the Cold War, the Soviets had a clear conception of this basic economic truth. You can have guns, but the more guns you have, the less butter you will be able to produce. And, conversely, the more butter you produce (for consumption), the fewer guns you will be able to produce (for capital purposes).
I've thought about the concept of the production possibility frontier recently in light of some of the criticisms that have been advanced concerning the staging of the Cricket World Cup in the West Indies. The critics, some of whom have taken an unduly simplistic view of the issue, seem to be saying that we should not have had the cricket series here because the money to support the cricket could have been spent on other, more useful, projects. And, starting from this position, some of the critics then try to throw cold water on the entire World Cup competition.
At a very basic level, the production possibility frontier concept would tell us that if you spend a lot of money on cricket, then you will have to spend less on, say, education. Given that there are limits to your economy, then expenditure in one area represents an opportunity cost with respect to other areas.
The criticism that expenditure on cricket will reduce expenditure in other areas is therefore an obvious point. It is the kind of point that one expects opponents to make in a high school debating competition: it is correct as a matter of arithmetic. It is, however, unduly simplistic to leave the matter there.
Cricket World Cup expenditure
In the first place, the expenditure on Cricket World Cup is substantial, a sacrifice in small, resource-starved economies. But, we should note that it will not be substantial for a significant period into the future. The main expenses incurred by the Caribbean states in connection with the cricket have been for infrastructure such as the construction or renovation of stadia, and for the improvement of roads. These expenses will not be incurred at the same level next year and so on. Thus they may seem high when looked at as one-time expenses, they are considerably less if considered over a longer period of time.
Second, in assessing the value for World Cup expenditure, we should look at the matter over the long term. The aforementioned infrastructure put up or improved for World Cup Cricket will not evaporate when the competition comes to an end. The improved Sabina will remain, as will the new Trelawny complex, this is value that cannot be assessed simply by reference to one competition. As for road improvement, the expenditure is easily justified as part of long-term development, quite independently of whether or not we are staging the World Cup.
There is another point to be kept in mind here. The production possibility frontier idea only tells us that if you spend on guns, you reduce your capacity to spend on Y. It does not tell us about other aspects of the relationship between spending on X, as against Y. But economies are characterised by many points of intersection and many l