Summary of Why The Gulf States Need To Keep Building Big Dumb Mega Projects | Economics Explained

00:00:00 - 00:20:00

The Gulf States need to keep building big, dumb mega projects in order to keep their economies afloat, but these projects often fail and can cause a lot of trouble. The video explains how the value of a currency is based on the context of other values in the global economy, and how the oil industry can draw in capital and labor that would have gone to producing consumer goods. However, when oil reserves are discovered, the land constraint shifts outwards and the production possibility frontier moves further up the chart, meaning that the amount of oil being produced has increased.

• 00:00:00 The Gulf States need to build big, dumb mega projects in order to keep their economies afloat, but these projects are often unsuccessful and can cause a lot of trouble.
• 00:05:00 The video explains how the value of a currency is based on the context of other values in the global economy. The example used is of the Japanese yen being worth less than the American dollar, but does not mean that the Japanese economy is more competitive. Dutch disease is a theorem that The Economist gave to a theory on the endowment effects of the factors of production on goods outputs. The theorem looks at the factors of production land, labor, and capital and assesses how a change in these factors will result in a change in the outputs produced by an economy. Every economy is limited by what is known as the production possibility frontier, beyond which it cannot produce any more products. When an economy is limited by land, labor, or capital, it will create a production possibility frontier (PPF). The oil industry draws in capital and labor that would have gone to producing consumer goods, because an investor is going to make much more money from a 100 million dollar oil rig than they will from a 100 million toys Factory. However, when oil reserves are discovered, the land constraint shifts outwards and the production possibility frontier moves further up the chart, meaning that the amount of oil being produced has increased.
• 00:10:00 This 1-paragraph summary discusses why the Gulf States need to keep building big, dumb mega projects, such as the one planned for Saudi Arabia's "smooth brain dictator" city. These projects provide a way for the countries to increase their capital and labor constraints, but the benefits are often not sustainable.
• 00:15:00 The Gulf States need to keep building big, dumb mega projects to keep their economy afloat due to the low value of their currency and the lack of other industries that can compete with oil production. However, these projects are not easy to sell to businesses, and they are likely to be unpopular with tourists.
• 00:20:00 The Gulf states need to keep building big dumb mega projects like the Burj Khalifa in order to maintain their stature in the world. However, this practice is not without its consequences, as it has attracted negative media attention and put the countries at risk of outlawing it altogether. While the public may be unaware of these issues, they are significant enough that they should be taken into account when judging the states' overall economic performance.