NASA and SpaceX will launch a trip to an asteroid that is about a kilometer across and mostly made of gold. But macroeconomist Edin Mujagic thinks that, contrary to what the headlines would imply, it won't make us rich overnight. It provides information about the fundamentals of the economy.
It has a diameter of around 200 kilometers and floats somewhere between Mars and Jupiter. This places Psyche 16 among the many rocks that orbit our sun. But the asteroid is unusual since it is primarily composed of gold. According to Mujagic, the rock is worth ten quintillion dollars. It says, "That's a one with 18 zeros after it."
To put that into perspective, consider that it exceeds the combined size of the whole global economy. "You could therefore use it to pay off all the debts of countries, companies and households," the economist stated. And you still have a ton of cash on hand. Mujagic scanned the headlines, reading things like, "Asteroid that could make every earthling rich."
However, the economist brings everyone back to reality: "Of course that's all wrong." And such a headline demonstrates that there is still much to learn about the functioning of the economy.
The price of gold would swiftly collapse to zero if it were theoretically conceivable to transfer that enormous boulder to the earth, according to Mujagic. He cites it as an effective illustration of how scarcity serves as the foundation of the economy. "We analyze scarcity, and by extension, we find the law of supply and demand," he claims. No matter how complex an economic phenomenon is, you can use this to describe it.
'How come inflation is so high?' he asks. 'This is because we require far more goods and services than are available. That is the foundation of economic science.'
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