The Price of Everything: A Parable of Possibility and Prosperity
Princeton University Press (2008); 224 pages; $9.69
Reviewed by Stephen Schmalhofer
I hated freshman economics at Yale. It was the only C I ever received. Taught in a massive lecture hall, the professor posted endless equations and formulas. I found it sterile and artificial. My father was the CEO of a poultry company in rural Pennsylvania. I wandered the production facility as a child and saw chickens hatched in Pennsylvania out of eggs from Ohio, fed soybeans from Brazil in German-designed storage tanks, transported by trucks assembled in Detroit and Kentucky, processed by special machinery built in the Netherlands and operated by workers from Mexico, Honduras, Guatemala and finally shipped around the world. They even sold the feet to China!
This is economics and it is anything but boring! It is gorgeous, like the spontaneously coordinating steps of a couple on the dance floor, a flock of birds or a school of fish. It is the delightfully humanizing marketplace, that virtual site of exchange where a man from Chile trades with a woman from France as though they are neighbors.
I have often annoyed friends by repeating my view that “Prices are beautiful.” We have a tendency to view prices as deception, a trick played on consumers to defraud us into paying more than we prefer. Prices are information. Like ants tracing pheromones, prices provide signals for the billions of buyers and sellers that we call “the market.” These prices guide our savings, our production and our consumption. Isn’t it marvelous how we can use a price to evaluate all three of those functions? Prices are like a universal language. (But far superior to Esperanto.)
Russell Roberts opens The Price of Everything: A Parable of Possibility and Prosperity in the aftermath of a California earthquake. A collegiate tennis hero rallies a spontaneous protest against the large retailer accused of price gouging. As radical activists exploit his celebrity, the young star seeks advice from the university president. He has only a few months left on campus but she helps him see to a new path to peace and prosperity.
Our preferences conflict, as multiple people want the same item. How do we reach a resolution? You could take it by force, smashing and grabbing what you want. You could plead your case before a judge. You could lobby a Senator for a favor. You could stand in line and submit a request to a bureaucrat. You could capture and enslave someone. Or you could express your desire for the good or service directly to the person selling that which you desire. The seller can then compare the intensity of your desire to that of other interested buyers. We express the intensity of our desires (and our willingness to sell) with little tags of information called prices.
The reader never quite forgets that The Price of Everything is a pedagogical novel, but Roberts possesses a light and fluid writing style known to readers of his blog, Café Hayek, co-authored with colleague Don Boudreaux. A classroom scene discussing “I, Pencil” is a predictable but welcome introduction to Leonard E. Read’s classic essay for younger generations. Roberts leaves marginal costs and demand curves behind in the final chapter, pouring out the silent hope of teachers everywhere who are destined to have their labors bear unseen fruit.
Stephen Schmalhofer (Yale University, 2008) is Assistant Vice President at Swiss Re Capital Markets. He resides in New York City.