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Robinson Crusoe Economy: A Simple Guide Framework For Modern Economies
Robinson Crusoe Economy: A Simple Guide Framework for Modern Economies
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Robinson Crusoe Economy: A Simple Guide Framework for Modern Economies
Introduction
Robinson Crusoe economy is a way to understand the complexities of economics in an easily perceivable manner, as it entails all the necessary elements that constitute an economy. ‘Robinson Crusoe’ is a novel written by Daniel Defoe and it was published in 1719. It is considered to be the first novel of modern features. Its publishing is also considered the start of the publishing industry. Robinson Crusoe, the protagonist of the story, disagrees with his parents and pursues his own dreams by setting out on an adventure that leads him to travel across the seas. On his way, the shipwrecks and he is thrown off on a remote island, where nobody can reach. There seems also no sign of already existing population. He is bound by fate to live there for about twenty-eight years at a stretch. He does not have any companion on the island. No ships sail by the island so that he someone can lend him a helping hand to sail up to his homeland. Therefore, he has to live there by surviving against all the odds of life.
The story of Robinson Crusoe is long and can be divided into different phases to understand the incidents in more detail. A considerable part of the story comprises his life spent before he sets out on the voyage. Then, there are details explained in the novel about his life after he is taken to his home country. However, to understand the economic basics from his life-story, the part of his life spent on the remote island is the most important of all, which is also the lengthiest part of discussion in the novel. It is on that island where Robinson relives the English culture and makes efforts to survive by deploying knowledge, skills, and culture of his country.
The life account of Robinson Crusoe is studied to make connections between simple and complex economies (Cheung, 2016). The main factors to be considered while discussing his life incidents include identification and explanation of scarcity he faces on the island. He make use of various goods on the island for his survival, which can be categorized as per the economic principles. Finally, the need for saving and investment can be understood by this story to apply these understandings in studying the practical situations of economic concerns. This implies that a good understanding of microeconomics can be achieved from the story. Further, principles of economic growth can be understood by the incidents happening to the protagonist’s life or situation (Lowe, 2017). The growth economics is employed mostly be developing or under-developed countries to indicate and establish paths for economic growth. These economies achieve success by utilizing the universal principles of saving and investment.
In Robinson Crusoe economy, entities involved are only a single individual. He is at the same time the consumer as well as the producer. His decisions will influence the outcomes of that particular economy (Pignol, 2017). Both the demand and the supply are made by this single individual. Further, Robinson himself is responsible for achieving the point of general equilibrium of the specific economy that exists on the island he presumes to own which. His management of the resources will enable him to produce a sufficient amount of goods needed. His ways to save goods and invest time appropriately will cause a scarcity-free economy on the island. His decisions to balance his demands, supply, and consumption will allow him to reach the general equilibrium that will ultimately ensure his survival on the island, or at least, secure a prosperous future for him.
The framework of Robinson Crusoe economy can be explained by considering certain factors and making some fundamental assumptions. The economy relates to the island where Robinson is living, and which is completely isolated from the rest of the world. This implies that the important function of a large economy, trade, is missing, which could be used to balance the demand and supply of goods (Cheung, 2016). Robinson Crusoe is the only economic agent present in this economy. He is the producer, consumer, and mediator. His sole decision will influence the chances of his survival. Since there is no trade on the island, it is essential that all goods needed by the consumer(s) will be produced using only the existing resources available on the island (Yu, 2016). These resources include land, natural waters, sunlight, and Robinson’s time. His health condition can affect the production of goods drastically.
The goods on the island can be categorized into two types: consumer goods and producer goods. Consumer goods include the coconut fruits that grow naturally on the island. The producer goods include certain tools, knives, and such other useful goods that will not be consumed directly by the consumer. Instead, these producer goods will help the producer to find or develop directly consumable goods (Toporowski, 2016). Robinson is the only person who will be responsible to maximize his profitability as well as utility. Profitability is related to his producer role, and utility will be considered in respect of his consumer role in the economy of the remote, isolated island. Robinson has to take care of many factors influencing the economy of that island.
Robinson lives for fifteen years all alone on the island and does not even catch a single glimpse of any human being (Rossi, 2017). Until this time, he alone constitutes the whole economy of that island. Later, he succeeds in rescuing one prisoner from the savages who are passing by the island. Now, the economy consists of two individuals. After a few years, Robinson and the prisoner, named Friday by him, succeed to rescue two more individuals from the seizure of savages. Among these two individuals, one is Friday’s father whereas the one is a Spaniard. All have to live there in order to secure their lives and ensure a good living. Therefore, they all have to consider the needs of the hour by applying the principles of saving and investment. People demand things and producers supply those goods for the end use of the customers (Richetti, 2019). The successful economy is one that achieves general equilibrium where demand and supply becomes equal or balanced, thereby making the economy free of scarcity.
Scarcity
Robinson Crusoe discovers on the island very soon that the circumstances are not favorable and he is going to suffer a great deal in case he is unable to manage things efficiently needed for his survival. He starts feeling hungry, his shelter needs arise. Since there is nobody else on the island, he is alone to make a positive or negative impact on his economic life. As per the story, the protagonist decides to demonstrate courage and live a life that is economically successful. He looks around what resources are available to him. He climbs up a coconut tree and finds fruit to his disposal. There are also streams of water that also makeup to be another resource for his living. Accessing fruits from the tree is not easy and it takes time. Crusoe analyzes the scarcity he faces and makes a plan to tackle the situation. Scarcity refers to the lack of goods to be consumed by users in economics, and it can be caused by inefficient use of resources available, and this implies that Crusoe has to be very cautious in utilizing the available resources (Andersson & Andersson, 2017). He is facing the utmost scarcity in his life. Robinson exclaims the scarcity he confronts in reference to an incident where he sees a tortoise on the isolated and remote island. He goes to the seaside where he finds a large tortoise or turtle. This incident happens after a long time since he is on the island. Crusoe narrates the incident saying that he has been unfortunate to see only a single turtle in all these days. “This was the first I had seen, which, it seems, was only my misfortune, not any defect of the place, or scarcity; for had I happened to be on the other side of the island, I might have hundreds of them, every day, as I found afterward, but perhaps had paid dear enough for them (Crusoe, 2011).”
Robinson Crusoe is facing scarcity of resources for production and, therefore, he must make strategy (in terms of economics) to maximize his profitability as well as utility. The available goods are coconuts and leisure with which he is supposed to make his living (Padfield, 2016). He can succeed in developing his little economy only if he is able to use his time in the best possible way and keep the usage of available consumer goods minimum. The main cause of scarcity on the island is the absence of all kinds of trade. No means to import goods is available to the economic agent.
The scarcity that Crusoe confronts on the island is not absolute, it is relative, and has been caused by certain economic factors. Scarcity is a quantifiable thing, and it increases or decreases in respect of the other factors that influence it. The scarcity exists in relation to the other goods available in an economy. To understand the scarcity in Robinson Crusoe economy, it is to be noted that Crusoe cannot spare all the time in producing bread for himself. This is the reason that Robinson has organized his time in the way that he finds enough time for rest and leisure activities. He goes in search of fruits or fish, and since he is alone on the island, and the consumer goods are scattered in the territory, it takes him almost twelve hours to collect sufficient food for him. A situation arises for him when he has options for sparing time for different pursuits or goods. For instance, if Crusoe opts for spending all his time to collect consumer good X, then he can collect 20 pieces of that commodity in one working day. If Crusoe opts for collecting two different goods per day, he will have to be contented with the decreased amount of each commodity. In this way, he will be able to collect 10 pieces of consumer good X and 10 pieces of consumer good Y. The relationship between different commodities would be linear in the second option. The opportunity cost will also be constant in this scenario, as the individual opts for getting an equal quantity of each commodity. The economic growth will be zero if Robinson consumes all the produced or collected goods and leaves nothing in balance to be used in the future. The scarcity indicates that economic growth is not possible due to limited availability or produced goods (Bullard, 2019). Scarcity can, therefore, be used as an indicator of ceased economic growth where the produced commodities equal the consumed commodity.
From the aforementioned discussion, it can be formulated that the scarcity coefficient will be positive if the produced goods happen to be scarcer in relation to the other goods. If the produced goods are in abundance relative to the other goods, it indicates that the scarcity coefficient would be negative. The third possibility entails the scarcity coefficient to be zero where no goods have become scarce and the state of balance exists in such economic condition. To sum up, it can be said that Robinson Crusoe economy entails three things that cause scarcity, that is, very limited time to produce goods, zero tradeoffs to contribute to the economic growth, and a little number of tools to be used as producer goods to make the consumer goods available. Another important aspect of this discussion is the relation of Robinson Crusoe's economy with the real world, today's economy to increase understanding of the subject avoiding the complexities involved. The scarcity in economies can be traced by the ratio of produced goods and consumer goods. The concept underlying this comparison has been elaborated above. Scarcity can be managed efficiently by making the ratio of both types of goods to be equal to one.
Types of Goods
Two types of goods are available for Crusoe that he can use for his benefit. The goods are scarce and he has to manage between them efficiently. Consumer goods are those that he will consume directly and which has direct benefit for him. Producer goods are those that can be used to produce consumer goods to be consumed for instant benefit of him. Coconuts (and fish) and running waters are the consumer goods that he can use for his economic benefit. The story of Robinson Crusoe tells the reader that he has been successful in bringing with him certain useful producer goods from the ship. He has a rifle to his disposal, and he possesses gunpowder as well. He has certain other tools that can help him fetch fruits from high trees and dig earth. Since he has been an individual of the civilized, developed society of his time, he has sufficient skills to recall his knowledge he gained all through his previous life. He is capable of reliving the culture he has left behind. He can survive by providing him with the basic necessities of his life. He has quoted in the story as well that he became happier living on the island than he had been in his homeland. Thus, he has producer goods as well to work for him and produce the consumer goods needed by him. The only thing he has to worry about is how he is going to manage the scarcity and survive on the island for a long time. All resources available needs his scrutiny and economic intelligence to remain sufficient.
In Robinson Crusoe economy, factors to be considered in his economy are varied in types. The land available to him is the island which he can use to produce goods and which is not in the custody of any other entity such that he finds himself restricted to use it for his purposes. He is, therefore, the landowner in this scenario. He has land to grow food for him but this activity will be affected by the time factor, as he has little time to use for his benefit. He has labor to run the economy, and this labor comprises only one man, which is none other than him. People do not live on that island who can provide labor for his land to be sewed and harvested. The capital goods or consumer goods include the raft that he uses for moving up to little distances in the water, rifle to be used for his safety, and some tools for everyday uses. He has, in fact, used also the rifle to send the savages away from his island who pass by the area and had prisoners. When Crusoe succeeds in rescuing various prisoners from the savages, he has gathered labor that will help him produce more consumer goods.
Robinson Crusoe makes effective use of different types of goods available to him on the remote island. He survives there for about twenty-eight years, by managing scarce resources and maximizing his economic benefits. He makes efficient use of capital goods available to him as well. During an attempt to bring the needed items to the island from the remains of the wrecked ship, he effectively uses his raft. He narrates in his story about the successful fetching of his cargo to the shore in these words, “As soon as I found water enough - for my raft drew about a foot of water - I thrust her upon that flat piece of ground, and there fastened or moored her, by sticking my two broken oars into the ground, one on one side near one end, and one on the other side near the other end; and thus I lay till the water ebbed away, and left my raft and all my cargo safe onshore (Robinson Crusoe—Chapter 4: First Weeks on the Island, n.d.).”
Robinson Crusoe's economy of goods can be simulated to understand complex economics of the real world. The real-world economics, however, differs from Robinson Crusoe economy in several ways, being similar in the basics. In real-world economies, tradeoffs exist, and goods are produced and distributed over distances of varying lengths. Economies share goods to make better use of the competitive advantages of one economy over the other. Life has become easier this sharing of consumer as well as producer goods. Time can be managed in a better way to be spared for more productive pursuits. People have become diversified and their needs and wants are also of dramatically varying types. Economies boost due to the increased lines of production and consumption. An enhanced level of flow of goods between economies makes it possible for economies to grow and thrive in competing business environments of the present time.
In Robinson Crusoe economy, goods are fewer and simpler and are employed in simpler projects. In the real world, the same types of goods have grown to an enormous variety of types and these goods (consumer and capital) determine the success of current economies. The rate at which goods are produced is affected by the labor employed and the sources available. Other factors affecting the production of goods include Robinson’s balance of efforts between the different types of commodities and variables. The state of equilibrium is achieved by the balance of inputs to the resulting effect by both types of goods. In the simpler context of Robinson Crusoe economy, equilibrium can be achieved conveniently because goods involved are very little in number, and managing their quantities is easier by the economic agent involved. This is not as easier in the modern economies where countless goods are exchanged every minute and transactions or tradeoffs are numerous. People have needs and wants and their necessities are the determining factor of the success or failure or the economy. No two persons have the same demands and this implies that the economists have a wide, unlimited scope of devising ways and practices to improve the economies.
Saving and Investment
Robinson Crusoe's economy is an economy of scarcity that has been transformed into a prosperous economy by the protagonist over time. Robinson being left alone on the island has to adopt the strategy of saving stocks to survive longer. To understand saving and investment in Robinson Crusoe economy, it is important to know the terms beforehand. Saving refers to keeping a certain amount of money aside that has been earned in a tradeoff or business activity. Saving can also refer to the storage of goods that are left unused in the current economic cycle to be used for some useful purpose in the future. People are always in the habit of saving their benefits and rights. They must also understand the need of saving goods that will keep them safe and well-doers in the context of their work history. The term investment refers to the utilization of available resources that can be used by other capable entities to bring collective good to the whole economy. All those factors that affect the economic cycle also impose negative or positive impacts on the effective use of resources.
Robinson Crusoe has limited sources that he can use to survive. Robinson Crusoe makes great effort in making the consumer as well as producer goods. He describes the way he makes efforts at one place in the novel this way, “I spared no pains, indeed, in this piece of fruitless toil, and spent, I think, three of four weeks about it (Grey, n.d.).”
His situation can be understood by referring to the classic example given in this regard. If Robinson needs one hour to fetch a coconut from the tree, he can collect twelve pieces of coconuts per day, provided that he works for twelve hours in a day. In order to increase his profitability or utility of goods, he has to indulge in saving or investing practices. Now, he can save fruits only to the extent which he can afford easily to maintain his health and be able to conduct daily activities normally. If he saves two pieces of coconut daily, he can save up to sixty pieces of fruit for his disposal. This saving can help him sustain during the periods of turmoil or decreased activity. He can survive for five days minimum, and the limit can increase depending on his daily consumption of the fruits. All the possible activity that he can put forth in saving option is to keep aside a few pieces of goods as a stock to be used in hard times when he is not able to work for any reason. The other thing Robinson can do to increase his economic benefit is that he can invest more hours in producing consumer goods. However, this can be really hectic for him because this practice will harm his health and will not allow him to carry on other activities of life, eventually disrupting his work-life balance. Therefore the better option for economic growth in Robinson Crusoe's economy is to save goods as much as possible by the economic agents involved.
The following graph can be used to illustrate the relationship between investment and produce in Robinson Crusoe economy.
Coconuts
Days
The graph represents the relationship that exists between days of work and number of fruits involved in Robinson's economy. This graph shows that the relationship between investment and produce is influenced by taking effective measures. There exist three possibilities in this situation. First, Robinson passes time doing no work at all, and does not collect any coconuts ever. This would result in a horizontal red line that shows that time passes but zero economic benefit has been achieved. Second, Robinson works for 25 days and gathers 50 pieces of coconuts. This has been represented by the orange line in the graph. Third, he works for only 12.5 days, and is able to gather the same number of fruits as he could in the previous situation. Robinson has been able to reach this level of efficiency only by making savings. He has been able to do the savings by reducing his daily consumption of fruits. He is now using only half of the quantity of fruits he has been using earlier. This shows that economic growth can substantially increase by following the golden principles of saving goods of economic value. All those economies that exist today can benefit from this principle. People can make their lives much better by making as much savings in their expenses as possible. Countries can achieve economic success by leveraging their goals in respect of saving economic goods.
Robinson Crusoe's economy has the potential to indicate certain other things that can help increase economic output and growth. The reduced consumption of consumer goods will not only increase the stocks of this economy but also provide other options to increase the productivity of the economy. Suppose, Robinson takes down only half of the number of coconuts every day as compared to the number of coconuts he has been fetching earlier for his daily use. This initiative will increase the remaining capital he has to use for producing goods. The working hours spent to produce goods are now half of the time spent previously during the production process. This spare time can be used to find out other productive ways to increase economic growth. Robinson can use his mind, or in economic terminology, he can use the available technology and expertise to introduce new efficient ways of producing goods. He can build some tools or devices or machines to make the production process easier. For instance, he makes a huge pile of several pieces of wood or a kind of ladder to climb up the trees easily. This can reduce his effort and save his energy. He can have spare time to think more ideas of growing his specific economy.
In relation to the modern economies, it can be understood that organizations can assign personnel and resources to put into the development efforts. Research and design departments can be improved by dedicating resources and funds. These practices can increase the output of the production processes in the firms. Inventory control can lead to increased savings as well. Cost control can help companies to spare funds for alternative ways of economic growth. Economies thrive by the efficient use of resources and labor. The combination of labor and investment coupled with the practice of saving can ensure the success of economies in the present world of business.
Conclusion
Robinson Crusoe's economy has been widely used by economists to make the complex economic models of present-day simpler to understand and use for development and growth of economies. Robinson Crusoe economy help to understand the foundations of economics. This understanding can be applied to become familiar with more complex economies. Consumer goods and capital goods remain the common factors in all economies. The relationship between the two types of goods should be understood to increase the opportunities available in economies. People can contribute to the growth and development of economies by saving goods and investing in useful pursuits. No economy can survive without implementing technologies and advancements so that the production processes could be improved to a considerable extent. Scarcity will remain the common feature of all economies as it is the natural component of every economic system, and states can only find ways to deal with it efficiently. Moreover, scarcity of goods can be transformed to the equilibrium point by efficiently using resources and opportunities. Continuing to stick to the traditional ways of producing goods cannot contribute to economic growth at all. All industries must employ updated systems and the best resources to get the desired outcomes.
References
Andersson, Å. E., & Andersson, D. E. (2017). Time and capital in economic doctrines. In Time, Space and Capital. Edward Elgar Publishing.
Bullard, R. (2019). Daniel Defoe’s Robinson Crusoe: A Gazetteer. Etudes Anglaises, 72(2), 131–134.
Cheung, S. N. (2016). Economic organization and transaction costs. The New Palgrave Dictionary of Economics, 1–5.
Crusoe, R. (n.d.). CHAPTER I - START IN LIFE. Robinson Crusoe, 487.
Grey, G. (n.d.). Robinson Crusoe—Read Online. Global Grey. Retrieved January 5, 2020, from https://www.globalgreyebooks.com/read-online/robinson-crusoe/robinson-crusoe-read-online.html
Lowe, A. (2017). On economic knowledge: Toward a science of political economics. Routledge.
Padfield, S. J. (2016). Socio-Economics: Challenging Mainstream Economic Models and Policies. Akron L. Rev., 49, 539.
Pignol, C. (2017). Which economic agent does Robinson Crusoe represent? In Economics and Literature (pp. 79–95). Routledge.
Richetti, J. (2019). Eurocentric Crusoe: The Farther Adventures of Robinson Crusoe. Etudes Anglaises, 72(2), 213–224.
Robinson Crusoe—Chapter 4: First Weeks on the Island. (n.d.). Retrieved January 5, 2020, from https://americanliterature.com/author/daniel-defoe/book/robinson-crusoe/chapter-4-first-weeks-on-the-island
Rossi, C. (2017). The Crusoe condition: Making within limits and the critical possibilities of fiction. The Journal of Modern Craft, 10(1), 19–35.
Söllner, F. (2016). The Use (and Abuse) of Robinson Crusoe in Neoclassical Economics. History of Political Economy, 48(1), 35–64.
Toporowski, J. (2016). Microfoundations, Minsky and classical political economy. Review of Political Economy, 28(1), 92–98.
Yu, T. Y. (2016). Record Keeping as a Tool for Improvement in Robinson Crusoe. 근대영미소설, 23(1), 121–141.
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