Sometimes the right solution isn’t the best one

On Tuesday, Professor Sherman said something along the lines “sometimes the right solution isn’t the best one”.  It was in reference to a bay game situation in which all the farmers switched to organic methods causing them to lose money and as a result made the system unsustainable.

I think this is one of many instances in which the integration of a less optimal or desired solution is necessary to the structure of a system as a whole.  In the farming example, there are two possibilities for why the farmers switched from conventional methods to organic.  Either they switched by their own free will or they were pressured by taxes imposed by regulators.  In both situations additional demand causes prices to be higher, therefore raising barriers to entry and putting additional financial stress on farmers.

When addressing informal settlements, such as the favelas in Brazil, there is a similar system structure.  Typically two different types of houses exist in a settlement, shacks built out of found materials and poorly constructed brick houses.  In this informal settlement system, new migrants enter the system with no money, building shacks and then saving to construct a more permanent dwelling.  When governments attempt to destroy or prevent temporary homes, it disrupts a crucial step in the economic growth for migrants.  In addition, it can increase demand for permanent dwellings, therefore raising construction prices and raising a barrier to entry.

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