Helping Africa With Economics: Beyond Educational Institution Construction and Considering Store Operator Education Regarding Product Prices

 

My definition of a market is very broad.  Basically, a market is *any set of goods that is for sale*.  You could take 5 different food products from a retail store in Vermont, and a type of laptop that is sold on Amazon, and three stuffed animals for sale in Germany, and say that that is a market.  Importantly, every market has a GDP that can be calculated; basically, it's net revenue, i.e., the sums of all of the sale prices of all of the products sold, typically calculated as the product of the average good quantity sold times the price of the average good, given a Marshallian graph for that market.

Now, to consider how this can help Africa.  You might think, the answer to improving the economy of Africa--or Honduras for that matter (I had a friend that I knew in college who founded Students Helping Honduras, the non-profit...his name is Shin Fujiyama and I used to spar with him at the UMW boxing club, although I haven't heard from him in years as of now)--is to build more educational institutions.  That is probably *one* answer, and it helps...but it's very costly and the returns on that investment will come out slowly.

My idea for improving the economies of developing countries is to train managers on how to improve revenues in their stores.  The store manager at each store should calculate:  the "store GDP" for the average product that they sell there, and, given the notion of a "random market" derived from a random subset of products at that store, the "market GDP" for each random market, i.e., each random basket of goods based on products at the store.  (Let's say the store sells at least 50 different products, which would be a good idea for running a healthy store where this idea would work well.)

The next step is, apply basic understandings of GDP--track the products and their prices/sales over time--and try to use my "essentialist price change equilibrium" idea, if my hypothesis turns out to be empirically true and backed by data to modify prices to maximize the expected GDP increase over time.  Additionally, try to examine, within each random basket, products where the price elasticity of demand is favorable to price increases--or even price decreases.  Basically, the pricing authority/manager at the store needs to calculate, for each random market, which products should increase or decrease in price to increase the GDP at that time.  If a time step is, say, one week, the manager should re-examine data every week and adjust prices in accordance with essentialist price change equilibrium ideas for improving "market GDPs"--both for the whole store and for individual random markets selected as described above--and in accordance with scientifically simpler analyses of price elasticities.

My claim is, if store managers in Africa are taught basic economics--perhaps from a book written in Swahili--and a handful of more advanced principles, like the ones written about just above, stores will be able to generate more revenue and profit, and the economy will start to thrive and support its local residents more--doctors, educators, and more will feel more comfortable setting up shop in African areas where there are thriving stores with plenty of selections for products to buy and where the overall per capita GDP is increasing.  Eventually, the taxation from the increased GDP will lead to better funded and therefore (likely and hopefully) safer, less corrupt governments, too.

Those are my best current ideas for helping Africa with economics.