At first the shipwrights are especially ecstatic. They begin to make lots of money as the bidding wars begin. They soon realize that they cannot keep up with the demand with the workers they currently employ. They begin to recruit other types of workers who they train to build and maintain boats, paying them a premium to switch their professions. The other lines of business soon find that they need to pay their workers more to keep them working for them, as shipbuilding is a prestigious profession. As the new shipwrights, and all of the workers for that matter, wages rise, they are able to buy more sushi every day. The sushi chef is embarrassed that he has run out of sushi on occasion, which has rarely happened in the past. To avoid that problem, he raises his prices.
Now the workers that did not get an immediate raise by switching to shipbuilding notice that they are not able to afford as much sushi as before. They complain to their bosses, who had already noticed the same thing, and already demanded higher prices for their inputs. They reluctantly agree to the wage increases.
Soon the price of sushi (and everything on the island) begin to rise, as there is more money but not yet more fish to sell as the new boats are only in the process of being built. And new fishing crews are recruited and trained (which also takes time).
Initially everyone seems to be enjoying more and more profitable business than ever before as the demand for everything in the economy booms.
As the price of sushi rises so does the price of the fish that will be sold to make it in the same manner as all the other ‘industries’. The first of the new boats to hit the fishing grounds are easily profitable with the higher price for fish. This seems to show that Krugman is a genius and the lone shark to criticize his plan looks foolish. Krugman rubs it in in his first island-wide column.
There is money to be made by investing all over the island. At first the rice owners cannot keep workers working in the field. Going to the sharks and showing them the problem they quickly agree to loan them money at very reasonable rates to buy the bigger hoes that will be needed to produce rice with the fewer workers available. Krugman supports these loans with the ship-wrecked cash.
In addition, there develops a booming market for fishing boats. Old owners sell at very high prices. Rice workers, who normally don’t have much income left over, begin to buy shares in boats; selling those shares the next week for a profit, and quickly buying again. They are even able to borrow money to buy into the boat market.
Things are so good that owners from every field are wealthy enough to become sharks. Traditionally only the most successful boat owners became sharks – and then only after many, many years of successful fishing and saving.
After some months there are many more boats out fishing and supplying the sushi makers with what they need. Since there are not that many islanders and the sea nearby is very fertile, there is practically no limit on the number of fish that can be caught.
Krugman basks in the prosperity that he has brought to the island.
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