the second thing that economists do

and so here it is... i did not forget. and seeing as im exactly half way through my degree now, i have hopefully picked up some points of value along the way!

to recap, the first thing economists do is that they analyse relationships ceteris parabus. if you want to know more about that, take a read of a previous post: ''the first thing economists do"...

The second thing
Moving on to more urgent matters, the second thing that economists do is to analyse situations in two different time frames: short run and long run. Short run analysis allows the economist to evaluate shifts and changes in economic conditions and their immidiate impact on the state of the economy. This is useful as in the short run things don't change much and so you can evaluate them easier.

BUT then there is the LONG RUN... and that's what im so taken with. I'm not going to be too long in trying to explain this- so you either get this or you don't, but try and picture the following...
One of the goals of economic policy is to keep a balance of payments account that is reasonable. The balance of payments account, for the purposes of this analysis, can be described as the amount of rands flowing into SA as a result of exports minus the amount of rands being spent abroad in order to purchase all those cheap CD players and other electronic rubbish from China, Taiwan and Japan. (and other imports too).... In SA, this account is constantly in deficit because we import more than we export. Isn't it nice to be living in a 3rd world country? Anyways, there is a problem when the economy of a country starts to do well because then people start to earn more and then they start to want to consume more which means that the demand for imports increases, which means that imports increase and resultantly the balance of payments account goes into further deficit. oh dear. Therefore, in the SHORT TERM we sit with a deficit which means that something needs to be done... like government could increase taxes in order to reduce people's disposable incomes and then imports would decline etc....

BUT! and this is where the budding economist in me starts to get excited... in the LONG RUN, something else happens... the economy ADAPTS. Think about the following logically... it's not rocket science (i know this cos im not a rocket scientist)...
1. When people's income is up there is an oversupply of money in the economy. This causes interest rates to go up which in turn causes overall spending to decline. When spending declines we have LESS IMPORTS> therefore BoP (Balance of Payments) deficit reduces.
2. When we import lots of junk then there is an oversupply of Rands in the global economy. When supply is up then demand is down (a building block of economic theory) and this means that the price of rands goes down. This means that the cost of foreign goods increases for south africans and therefore LESS IMPORTS> therefore the deficit reduces even more!
BEAUTIFUL STUFF... long run analysis is great because i realise that over and over there seems to be balance... there seems to be adjustment... continuously. This is not true in some instances of course but i find the amount of times it does occur to be uncanny.

And it get me thinking you know. Long run = adjustment. I start to think about life in general and the need for adjustment. Take a divorce for example. In the short run it sucks. It's hopeless. There is despair. There is hurt. And no one can see the light at the end of the tunnel. But then it works out. People adjust. They are forced to. I have recently broken up with my girlfriend of 2 years... i don't know if i will ever know another girl quite like her. I want her. I cant have her now. It's tough. She's in my mind, dreams etc.... And so what must i do? What other option is there? I adjust.... Life without her still works.

Then my brain takes another tangent and i think about evolution and darwin's theory on natural selection. The fittest survive. The weak one perishes and the LONG run favours those who learn how to survive in challenging conditions and those that adapt.

In fact the long run speaks of little else besides adaptation.

And that is what they do, these economists. Clever bunch they are.