Simple Economics and the little red dot (a very simplified view)

What you are looking at is the Production Possibility Frontier (PPF)
Know it, Memorise it, It might save your life one day, just like CPR. (Fig. 1)

Firstly, I would like all readers to note that whatever is written in the paragraphs after this, is nothing new. You can read it all in textbooks, online resources, find a friend who studies the subject and etc. (Because .etc is used when you are left with no other examples to use.) 

So what is Economics? And what has it got to do with a young, ambitious, Singaporean such as yourself (Dear Reader)? Well, at the base of everything, Economics is an understanding of how the world works. And different from Sociology, we do not wish to concern ourselves with "sociological perspectives and questions", but the study of our own wealth, how we get our income, and how we use it. It can be extended to study political economics on a macro level, but I assume (and we assume a lot in this subject, there are even chapters written on assumptions) that not all of us aspire to work for the Government or stat boards and are pretty much happier living in our own self-contained bubbles. 

Then you may ask (for the lesser informed), what is that picture at the top of this post? That, is the PPF. It is a graph that compares the production rates of two commodities using the same factors of production (labour, capital, technologies, land resources etc). And the reason why I feel that it's important to note this out is that in every country and economy, this simplified PPF can indirectly show the current position a country's economy is in. For example, people may sing praises of China and India for showing strong contention in being major economic powers of the future.

Fig. 2

But isn't the progress of these economies because of investments being pumped in to their factors of production (labour and capital) that their PPF is able to be pushed further and expand more rapidly?

"First-world" countries such as ourselves I'm afraid are pushing the limits of our own PPF. This little red dot on the world map is fast approaching the limits of our own production. It is well known we are scarce for land and natural resources and as such, the government insists that its People are the "golden resource" needed to keep the economy thriving.       

Aha! Therein lies the problem. When your one and only resource of Labour is starting to face a brain-drain (specialised services in Banking, medical, infosystems), what are you going to do? Well, so far, the solution seems to be importing more talent. Of course, it is a well known fact that it is bound to cause some discontent among the masses. And it's not a pretty sight.

Basic economic theory would (in all its rationality) would suggest that a farmer, seeking to profit more from a higher output of production, would need to invest and "upgrade" his technologies. Getting better fertilisers, more land, better irrigation systems and so on and so forth.

So why is it, that in a great country that boasts some of the second-to-greatest minds on this planet have such a frighteningly wide wage gap between the top and the lowest earners. 

My simple view would be those governing us are too preoccupied with trying to push our country's PPF further outwards, thinking that a higher GDP would invite more foreign investments (which is true). But yet, they forget the sentiments on the ground and I'm afraid that we are stuck being Pareto inefficient for having a surplus of labour that we have not using efficiently.

I would go on, but then I would be beating about the bush. Simply put, as individuals who wish to seek a better future for ourselves and our families, I think, it's important to understand these nuances that governs our daily lives. 

And because money is unfortunately the issue of underpins every other problem we have in our society, it's only "smart" that we know how to control it as individuals, to be more confident and less tied down to it. And hopefully, being better individuals, we will make up a society that understands each other better from a stronger, rational point of view. 

Personal financing, now that's an interesting topic to look forward to the next time.