One Man Economy

For some people it can be almost impossible to imagine an economy when there is just one person. This is caused by people thinking economics is only about money. Truth is, economics is everywhere, even when there is just one person.

A good example of this would be Robinson Crusoe. He does not have any money, but that does not mean there is no economy. His economy involves coconuts, sticks, stones, leaves etc. Robinson needs to eat, therefore he decides that he will get himself some coconuts. He finds out that he can gather 1 coconut per hour.* At the end of the day, he spends 10 hours gathering coconuts and eats all 10 of them. He does this for some time and decides he is going to save 2 coconuts a day, in case of an emergency. This is an example of saving and investing.  He saves coconuts and “invests” them in an “emergency fund”.

One day, Robinson comes up with an idea. He decides to take 2 days off and eat some coconuts from his emergency fund, so he can make a tool for gathering. After 2 days, he has a pole with which he can gather 20 coconuts in just 4 hours. This is an example of using natural resources (wood) and labor (work) to make a capital good (a pole), with which he can get more consumer goods (coconuts) and therefore more leisure (more free time, more food).

However, he finds out that the pole needs maintenance, otherwise it will break. He needs 7 hours to fix it. Instead of spending 7 hours on the last day to fix it, Robinson decides to spend 1 hour a day on top of the original 4 hours working. With this he is considering if the opportunity cost will outweigh the benefits.

There is more to it than just this, but today we were just looking at some examples of how an one man economy works and that economics does not rotate only around money.

*Please note that these are only examples, therefore it might not be precise.

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