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Please begin with an informative title:

There is trouble in Monkeyville. It's about to get bananas...


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The Story of the Monkey King: A Macroeconomic Fairytale

By Nathan Jaco

The Monkey King’s name is Kong. He is the ruler of the kingdom of Monkeyville. Monkeyville is an exporter, and its primary export is wooden planks with screws in them. The Monkey King has to decide how to build his economy from basic assembly lines. In the Monkeyville economy monkey laborers and screwdrivers are substitutes in the wooden planks with screws production process.

Four generations ago, Kong’s ancestor King Nim Chimpsky built assembly lines with three monkeys and no screwdrivers. It was hard back-breaking labor screwing all those screws into all those wooden planks by hand, but every monkey laborer who wanted a job had one. Three generations ago, Kong’s grandfather Curious King George I started to buy screwdrivers and gave one to each monkey. This made it easier for the monkeys to screw the screws into wooden planks, but Curious King George I couldn’t buy those screwdrivers without laying off monkey workers. So he substituted a screwdriver for every third monkey worker, and the assembly lines consisted of two monkey laborers with two screwdrivers. This made them more efficient, but the unemployment rate in Monkeyville shot up to roughly 33%. A generation ago, the Kong’s dad Curious King George W. made further substitutions of capital for labor. He gave every employed monkey laborer two screwdrivers. This made the monkey laborers much more efficient, but the unemployment rate in Monkeyville increased by almost 100%.

Now, the reigning Monkey King presides over an economy where a monkey programmer can write code that will enable 1,000 robotic screwdrivers to power-drive screws into planks, with only a few monkey maintenance men to attend to them from time to time. The Monkeyville economy has never been more efficient than it is under the reign of Kong. However, there was a big problem in Monkeyville.

Kong’s ancestor King Nim Chimpsky faced a revolt from his people. The unionized monkey workers at the time demanded more benefits for their hard work because they did not want to empty their stores of bananas if when they got old or sick. So Nim Chimpsky started programs to help elderly and disabled monkeys live in dignity when they could no longer work. King Nim Chimpsky called these programs Monkey Security and MonkeyCare. The plan was simple: every monkey laborer will receive pre-defined benefits based on their earnings. And to offset the difference caused by inflation and mistakes in the primitive monkey actuarial calculations, the next generation of monkey laborers would pay part of the previous generation’s needs. This sounded like a good plan because monkey population growth in Monkeyville would mean that each generation would produce successive generations with more and more monkeys who could become workers. But now, with so many unemployed monkeys there were not enough monkey laborers to pay into the system.

The Monkey King scratched his head (actually, he had someone do that for him while they picked parasites out of his crown). What should Kong do? Well, his Royal Monkey Vizier advised him to levy a tax against the makers of screwdrivers, who don’t even have to work to make the pile of bananas they sit on. A tax on all those screwdrivers (capital) would provide enough to support generations of retired and disabled monkeys, as well as all the unemployed monkeys who couldn’t find work because they lacked the skill.

But it’s not that simple. Kong has rivals for the Kingship of Monkeyville. The screwdriver makers are some of his biggest supporters, and they supply him with lots of bananas so he can live comfortably in his Monkey Palace. The screwdriver producers say that the monkeys in Monkeyville enjoy a level of health and welfare they couldn’t have imagined a generation ago. They say that their high-tech screwdrivers are making the monkey’s lives too easy, and that the unappreciative monkey laborers should work until later in their monkey lives, and the retired and disabled monkeys should get fewer benefits. The monkey businessmen think that all that matters is their monkey business.

The Monkey King faces a difficult choice: hire more monkey workers at the opportunity cost of investments and possible advancements in robotic screwdriver technology that could put Monkeyville behind in the world economy OR invest further in screwdriver markets and hope the productive efficiencies were able to offset the loss of jobs for monkey workers and loss of pension-supporting wages to unemployed, retired, and disabled monkeys. So, what’s the problem in Monkeyville: too many monkeys (excess labor) or too many screwdrivers (excess capital)?

Extended (Optional)


How should the Monkey King structure the productive economy of Monkeyville?

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