Today’s Robinson Crusoe

Robinson Crusoe (RC) is the most absurd person that you will come across while studying microeconomics (especially when you hate studying microeconomics and fail to make sense out of it). RC is a man who has a beach to himself, lucky at that, and the only man on that island, with no means to go anywhere else. He has all the time to himself to do only two things, spend it looking at the endless ocean, which we economists call leisure, or climb up coconut trees, and consume coconuts, called consumption. His entire life is a trade-off between these two ‘goods’, leisure and consumption, that make up his twenty-four hour long day. As much as you would like an entire beach to yourself, the RC economy is absurd, isn’t it?

For a student not belonging to the faculty of economics, it is hard to think of a world with just one person in it, and that too, without money. And a single person cannot even barter with himself, hell we spend hours in the classroom learning about this phenomenon. I fail to understand why. But now that I think about it, it has kind of started making sense in a very superficial way.

The e-commerce boom has given rise to an entire on-demand economy. As the name suggests, as much spoilt for choice we are, we have things at our doorsteps in a matter of hours, thanks to these digital hypermarkets and logistics systems that completely blow my mind away. But how does all this add up to the RC economy that I was talking about?  Think about marketplaces like OLX or Quikr, or cab aggregators like Ola and Uber, or property aggregators like Airbnb. What has all of this done?

All these models thrive on one and only commodity that you own, the surplus commodity. Bought something but not using it? List it on OLX. Have a car that you use only on the weekends? Rent it out to a driver and list it on Uber for the weekdays. The same goes for Airbnb if you have an empty home.

Where does this get us to? All this helps us make money from our surplus assets. And the money that we make, helps our consumption. Say, you have enough assets, whose income helps you survive through the month. You are only left with two goods, leisure and consumption! You don’t have to go to work. You are constantly trading with your respective Man Friday, another person our dear RC meets later in our ever-absurd story and trades with, and you are surviving. All of this is happening, not here, but in the US for sure, where the regulations are a lot more relaxed. 57% people outside the organised labour force are actually freelancing, or choose to do so, thanks to Uber and Airbnb.

This is leading to a completely different kind of economy, which is kind of cashless, close to barter, and it is taking the world (or at least the States) by storm, one house and one taxi at a time. Is it that different? No, I don’t think so! It just like our dear Robinson Crusoe, just that he’s got very modern now!

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9 comments

  1. Not barter actually but going closer to digital currency. We have to still value our good with respect to some common commodity, its only that the need for its physical exchange is evaporating. We are nowhere close to RC economy as our price and quantity calculations depend on several factors. We learn RC only to have an intuitive idea on what we are ultimately trying to do, but how we do it gets complicated. The micro will make sense if you consider only on what and not how, as in advanced course only one will be introduced to real world how, given you can take the mathematics involved.

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    • What you point is correct. It also focuses on working patterns. People will try to accumulate assets as soon as they can and rent them out. That’s the angle I am taking. They then only have to choose between leisure and consumption. There is no labour involved!

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  2. There is labour, as it is from wages they take savings and invest which accumulate to form assets. Their earnings would then consist of rent and wages.

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    • Ofcourse you can’t talk in a perfect sense! It’s not as easy as it was for RC. Wages will be there for a lot of time. But later, they will go away. This is a very very slow process. Look beyond the conventional and you might just see it happening! The only difference is, it is not as fictional as RC. There is a real setting to it.

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      • RC had to work to get the coconuts, bounded in time. How can wages disappear slowly? A person enjoy from rents after retirement, meaning he worked to accumulate an asset and is now earning return on it. RC have no assets, he can’t get them without climbing the trees. If you take them as endowments and that too infinite, there is no question of trade off with leisure.

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      • Think about a person inheriting loads of wealth from his father and not having any incentive to increase it. I know it’s not applicable to everyone. But the freelancing thing is true. Lesser people want a fixed job with a fixed wage. They are OK doing away with it. It is a risk worth taking because they have a home they can rent out on Airbnb and spend their month

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      • But that is not the case with RC. He inherits nothing, he has no wealth, he has to spend the constrained time to get those coconuts. There is no relation between RC and Flickr thing you are talking about.

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