We win with markets

Paul Rubin made a great point in his Wall Street Journal op-ed (thanks to Don Boudreaux, Cafe Hayek, for pointing to it).

Economists should point out that what makes markets thrive is cooperation, while competition plays a supporting role. This might help the perception of markets. As an example:

…we might say that a poor person has been outcompeted in the market. Or we might say that a poor person cannot successfully cooperate with others because he lacks valuable skills and has little to sell.

Again, the words matter because viewing the circumstance in terms of competition could lead to penalizing those who are viewed as outcompeting him, even though they did nothing wrong. It might even lead to banning certain terms in transactions—with minimum-wage laws, for instance—that make it even more difficult for the poor person to cooperate. The cooperative metaphor, by contrast, would suggest that the solution is increasing the skills of the poor person, giving him something to sell on the market.

Unfortunately, Rubin would still need to convince many other economists that minimum wage laws make it more difficult for the poor person to cooperate.

Why We Have Whoppers

I have a taste for Whoppers, the round, malt ball candy.

A co-worker has a spread of candy that he’s giving away from his children’s Halloween pursuits.  On my way by his desk, I picked up a pack of Whoppers.  The following conversation ensued (or close to it).

“Yuck, Whoppers.  Take all of them.  I don’t even know why they make Whoppers.  Seems like a waste.”

“I like them,” I responded.

“You do?  Really?  I can’t see why.”

“I like the flavor.  I’ve always liked the taste of malt and chocolate,” I said.

“Really?  They taste like chocolate covered chalk to me,” he replied.

“Well, it seems not everyone agrees with you.”

He asks, “Why’s that?”

“Because Whoppers have been around for awhile.  I don’t think they’d continue to make them if someone didn’t like them and buy them.” (Of course, I could be wrong about that. It could be that nobody likes Whoppers, but people buy them for others thinking others like them, but don’t really.  But, he didn’t bring that up.)

“True.”

“That’s the great thing about products in the free market.  Not everyone has to like a product to have it made.  Not even the majority of people need to like it.  Just enough people to make a profit,” I said.

“Ah, that’s true.”

“If Whoppers were in the political market, and we had to make a categorical decision by voting to keep making Whoppers or not, then Whoppers might be in trouble.  Thankfully, we don’t have to make that decision. You can imagine, if we did, all the Whopper lovers arguing, protesting and pleading with the non-Whopper lovers to vote to keep making Whoppers.  Essentially, we’d get exactly what we get with just about everything else that we thrust into the political market – conflict.”

“Very true.  Please take all of the Whoppers.”

“Thank you.”

“No.  Thank you.”  He was thanking for taking most of his Whoppers, not for the conversation.  But, even without trading money here, we engaged in mutually beneficial transaction.

End conversation.  I walked away with a few days supply of Whoppers.

Think of all the other products that you use that are produced in the free market and might not exist if you had to get a majority of people to vote for it.   It would be difficult for any genre of music to survive.  Magazines. Hobbies. Fruits. Vegetables. Snack bars.  Shampoo. Movies. TV shows. Coffee. Cell phones.

If any of these required a majority vote, it’s likely the products that suit your specific preferences would not be available.  It’s easy to see that what would be available, in most cases, would blah versions that might not include the features you value.

Instead of the minty, whitening, cavity fighting toothpaste, in a stand up squeeze pouch and no-mess cap, we might just have flavorless, non-whitening, toothpaste with the traditional, messy lids.  Not a major setback by any means, but definitely a minor one for those of us who valued the other kind.

But I can well imagine the fights for votes.  Urban, young professionals would push their whitening agenda.  Others might support a main platform of no-mess lid, softly support whitening and multiple flavors, but think that the cavity-protection chemicals could damage our brains.   Still others really want the no-mess lids, but not the travel size and they think mint flavoring is the evil work of an ancient order that has controlled our lives behind the scenes for centuries.  Others note studies that show that mint flavoring results in more consistent brushing, fewer cavities, better teeth and fewer dental bills.

Though, if toothpaste had always been in the political arena, all the different versions of toothpaste would not have evolved because we wouldn’t have the market experimentation and trial-and-error, we may never have known that these options were possible and we simply wouldn’t know what we were missing.  Free market supporters would try to explain to us that we don’t know what we’re missing, but we wouldn’t get it.

Thank you free market for making Whoppers.

The Answers Are All Around Us

Today’s EconTalk podcast was Knowledge, Power and Unchecked and Unbalanced with guest Arnold Kling.  Like occasional EconTalk guest Mike Munger and the host Russ Roberts, Kling has a knack for discussing economic principles in common language and looking at real world examples to illustrate these principles in things that are so common that we generally take them for granted.

The entire podcast is worth a listen.  I found a few things especially blog worthy.

First, we often talk about bigger and smaller government.  Kling makes an interesting point (near 14:36 mark).  As we have grown government spending the number of governmental units, or decision-makers, has stayed the same.  We have one Congress, 50 states, 435 members of Congress, 100 Senators.  Yet, more is spent per capita than ever before and the number of people making the Continue reading

We All Work For Each Other

There was a nice bit of good and subtle writing on the TV sitcom Parks and Recreation this week.

Ron Swanson is the head of the Parks Dept.  His admin assistant, April, quits.  There’s a shoe shine stand in the Pawnee city government building manned by Andy, who happens to have a good relationship with April.

While shining Swanson’s shoes, Andy tells him, “You have to get April back.  If April quits, I quit.”

Swanson says, “You don’t work for me.”

Andy replies, “I don’t, nor will I ever.”

Then Andy goes back to happily shining Swanson’s shoes and Swanson relaxes because he likes to get his shoes shined by Andy.

The main joke here is the awkward exchange.  It helps to know the characters to understand that humor.

To me the subtle joke was even funnier.  There may not have been an intended subtle joke, which would make it even funnier to me because that would mean even the makers of the show didn’t catch the irony.  But, I have to believe that the extra second or two the show focused on Andy shining Swanson’s shoes was intentional.

What was the subtle joke, you might ask?

While Swanson declares that Andy doesn’t work for him and Andy agrees and states he would never work for him, what exactly is he doing?  He’s working for him.

He’s shining Swanson’s shoes.  Swanson voluntarily hires Andy every time he decides to sit in Andy’s shine chair.  And Andy works for Swanson every time he voluntarily decides to shine Swanson’s shoes in exchange for the few dollars he charges to complete his work.

I thought this was funny because not recognizing this is common.  We pay others to do things for us so frequently that we take it for granted and don’t even realize we’re doing it.  We hire and fire people from our lives every single day.

When we decide to buy something, we’re hiring the people that brought us that something.  When we decide to not buy something, we’re firing them. This is the essence of Adam Smith’s Invisible Hand.  It directs a great deal of the activities that take place in our country.