Scarcity and Economic Tradeoffs

Most of us have heard the truism that life is full of tradeoffs. This is indeed a truism because nearly every resource necessary to pursue happiness is in short supply. People must choose between alternatives under these axiomatic conditions of scarcity, lest the resources run dry. The heuristic is an economizing one--consume scarce resources in an order that maximizes satisfaction.

Pervasive scarcity thus drives people to be predominantly 'economic' in their behavior, trading off one thing in order to obtain something else deemed to possess more utility.

A class in economics is not necessary to learn this. Pursuing our dreams demands that we learn about making tradeoffs (i.e., economizing) in our daily decision-making.

Baltic Dry Index

The Baltic Dry Index (BDI) is a price index of international oceanic shipping rates. When the BDI goes up, it implies generally higher prices to ship stuff via cargo vessels around the world.

Many market participants regard the BDI as an indicator of global trade. Higher BDIs imply stonger trade patterns.

During the 2008 credit market collapse, the BDI experienced a jaw-dropping decline--falling from over 11,000 to under 1000 in just a few months.

Over the past few months, the BDI has been weakening once again. Thus it represents a divergence in the thesis that economies are generally strengthening worldwide.

Another metric that may be worth watching...

Defining and Measuring Inflation

This article touches on why inflation, as measured by the Consumer Price Index, is chronically under-reported.

Did you know that the dominant definition of inflation has not always been linked to 'change in prices?' A century ago, inflation was commonly defined in terms of the quantity of money and credit.

You can ponder which definition makes more sense...