The English Food, Mexico’s Central Heating, and the Egyptian Uprising

Paul Krugman wrote (link) about the “stubborn persistence of bad food in England.” Paraphrasing the article, the quality of food in London dropped significantly due to rapid urbanisation that preceded good transportation system that brought fresh food from the farms. This created a big demand for canned food-based diet, and soon the demand for quality food dropped. This resulted in London being stuck in a bad equilibrium, where good food was not supplied because good food was not demanded. Enough critical mass needed to demand good quality food was created only after many Londoners were able to afford frequent foreign trips.

Krugman also noticed (link) that Felix Salmon attributes (link) a similar reason (among others) for lack of central heating units in Mexico. A given Mexico dweller (including the rich) does not have central heating because other Mexico dwellers don’t have central heating. This “path dependency” creates a bad equilibrium, where one gets through the short-spanned Mexican winter without central heating.

Time columnist, Fareed Zakaria, explains (link) that reforms and revolutions often go hand-in-hand in oppressive regimes. He says that the most dangerous phase in an autocratic regime is when the dictator decides to reform the economy. Reforms expose the citizens to new possibilities and create a demand for better governance. When the government is not able to meet the demands, revolutions occur. This account (link) articulates the line of thought expressed by Zakaria. Zakaria also states that stagnant countries like Syria and North Korea have remained more stable. Thus, a lack of knowledge creates a bad equilibrium.

So, what is common among the English food, Mexico’s central heating, and the Egyptian uprising? They follow a demand-driven economic model, where a bad equilibrium is possible.

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