Question

For millions of years our human ancestors were mobile foragers (hunter and gathers). There were no governments (states). About 13,000 years ago some people began settling down becoming sedentary and engaging in early forms of agriculture. Three of the earliest settlements were along the Nile river in Egypt, the Euphrates river in the Middle East, and the Indus river in India. River valleys such as these are often very fertile for agriculture because of flooding and the possibility of irrigation.

Assume that these were simple economies with a fixed number of people and two goods, food and leisure, food was produced using an agricultural technology which employed labour and the land and water of the river valley to grow the food. Also imagine that each farmer had enough land to grow enough food, some living along the riverfront and others living inland.

Would you expect completely decentralized competitive private market behaviour in this economy to lead to a Pareto efficient outcome? Fully explain your answer in terms of what you have learned in the course. Most of your marks will be for your explanation.

Based on the economy described in and your conclusions from the question above on early agricultural communities, explain how you would expect this society to develop. Explain your answer fully.

Answer 1

                                    The given passage talks about the economic condition of the settled agrarian society which states that there were fixed number of people and there were only two goods, food and leisure. It is also given that each farmer had enough land to grow the food and utilize for themselves. The following are the major features of such an economy which has to be analyzed so that we could study whether they represent an economic structure that is similar to a decentralized private market behavior of today

· The economy was dependent mainly on agriculture and trade with importance to pottery and similar local manufacturing techniques

· The people were aware of the valuable commodities and hence trade was also conducted on similar commodities

· Those who acquired the riverside had the advantage over agriculture and were more leaned towards a better and stable living

· Most of the farmers owned their own land and there were less tensions on the acquisition of wealth

· As mentioned, food and leisure were the two major goods and hence many of the other factors as we see today had no influence on the economy of those era

                                             The above were some of the major features of the economy during the era mentioned. A private competitive market refers to such a market were strict competitions are present and those who could take the advantage of the competition would make benefits out of it and the others would suffer, This concept is reflected in the concept of Pareto efficiency also were it is said that no individual preference can be better off without making one individual or other preference worse.

                                    It is believed that the people of those times, as mentioned above were settled beside the river and hence acquisition of a riverside was considered to be among the major competition those times. Those who could acquire the river side would have the advantage of better access to agricultural facilities and were expected to have an advantage in the economy. This has the similarity to the private market economy of today which is dependent on the market economics and international trade statistics.

                                    Based on the above conclusions, the following are the ways in which the society is expected to develop further economically

· With more agricultural output, the focus would shift to trade in agricultural commodities which could bring benefits to the domestic economy

· As trade progresses, more sectors would rise in the economy and hence would lead to the development of domestic economy

· The development of domestic economy as a whole would lead to a stable economy and hence would help in further international trade benefits

· Thus, with improved trade patterns and focus on the domestic economy, there would be a gradual shift in the society as a whole and thus there would be development in the society.