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Risk And Economics In The United States Vs. China

1626 words - 7 pages


Introduction
The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters (Zuckerman, 2013) and The Big Short: Inside the Doomsday Machine (Lewis, 2011) are two books that each tell a story of how normal citizens in a capitalist society became incredibly successful. In The Frackers, Zuckerman tells the story of oil and gas wildcatters that changed the face of the American energy market. These bold wildcatters pioneered a new method of extracting oil and gas known as fracking. Fracking had been considered to be impractical by established names in the oil and gas industry due to its high cost. However, the entrepreneurs described in the book proved the industry “experts” wrong by taking the risk of investing in fracking and making huge profits, helping to fuel the new age of American energy exploration. The Big Short tells the story of how a small number of investors made huge profits by correctly predicting the economic collapse of 2008. The financial bubble that grew until 2008 was fueled by complicated investment models that even sophisticated investors at prominent institutions did not fully understand. However, a small group of savvy investors foresaw the pending financial disaster and made huge profits by betting against the market. Hence, both books tell the story of how intelligent and bold entrepreneurs amassed huge wealth by taking risks and betting against the conventional wisdom.
The Party: The Secret of China’s Communist Rulers (McGregor, 2012) tells a very different story. McGregor describes the communist political and economic system in China. The communist system prohibits entrepreneurs and risk takers like the ones described above from amassing wealth through investment. As a result, the economic system in China does not reward risk taking in the way the American capitalist system does. Instead, the way to become economically successful in China is to become a prominent member of the Communist Party. Economic resources in China are allocated by the government in such a way as to combine and maintain the Party’s power, and working towards that cause is the way to become economically successful under such a system. So, the books described above provide a clear difference to the economic and political system described in The Party.

Section 1
As described in the introduction, The Frackers tells the story of how a small group of brave wildcatters became very successful through the new method of removing oil and gas known as fracking. Fracking is known as the method that drillers use to inject fluids into the holes they drill at very high pressures. This causes the shale formations under the ground to break apart, which releases more oil and gas that can be extracted. While the method increases the amount of oil and gas that can be extracted, it was dismissed by industry experts as being impractical. It was dismissed because fracking is very expensive, and it was thought that the marginal cost of fracking was...

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