A while back I visited my friend Michelle. We were standing outside talking about plants. I happened to notice that there was a tree near the street that had yellowish mushrooms growing on it. I pointed the tree out to Michelle and we walked over to take a closer look at the mushrooms. After a quick inspection I told her that we should eat them. She said that I was crazy. I told her that I was pretty sure that they were edible. Again, she said that I was crazy… but she got a knife and a bag. I cut some of the mushrooms off the tree, put them into the bag, took them home, sauteed them and ate them. Then I texted her that I was still alive.
Chicken of the woods is one of the very few mushrooms that I feel competent enough to identify. It’s fairly distinct (famous last words).
What does my story have to do with your story? Well… I made my life a little better off because I was able to correctly ID the mushroom. There was actually far more mushroom than I could personally eat… so in theory I could have collected all the mushrooms from the tree and sold the surplus. This would have made myself, and other people, better off.
I liked your story… and it brings up a lot of good and valid and important points… but this part is a little tricky…
“while dollars in the hands of the poor are supercharged in their potency for making lives better”
Making whose lives better?
Clearly there’s a utilitarian argument for taking money from the rich and putting into the hands of the poor. A poor person is going to derive a lot more utility from the money than a rich person would. Redistribution increases total utility. Yes, of course. And the poor might now be able to afford to buy mushrooms. Which would certainly make their lives better.
Except… buying mushrooms isn’t the same thing as selling mushrooms. If putting money into the hands of the poor resulted in them selling mushrooms… then this would make their lives better… and it would also make other people’s lives better.
For me the big picture is overcoming a scarcity of mushrooms. In other words…. the big picture is abundance.
The fact is that a utilitarian argument might, in the long run, decrease abundance.
Now I’m pretty sure that you were using the utilitarian argument to help liberals see immigration, the minimum wage and licensing in a better light. And I really appreciated how you did that. You took their rule and used it to measure three important issues.
But I really would like to try and encourage you to consider the abundance aspect.
If you had walked past the tree with the mushrooms in it… would you have known that they were edible? If so, then I’m pretty sure that we are the exception rather than the rule. Most people would not have recognized that they were edible.
What if, rather than mushrooms growing on the tree, there had been a $20 dollar bill pinned to the tree? That would have been a no brainer! Anybody who walked by would have instantly recognized the value of a $20 bill. Sooner, rather than later, somebody would have grabbed the $20 and put it into their pocket. And their life would have been marginally better off.
Lots of orchids also grow on trees. Unlike the mushroom though… they aren’t parasitic. However, people in developing countries did think that they were parasitic. Workers would grow through the orchards… remove the orchids from the trees, pile them up and burn them. As somebody who spends money on orchids… from my perspective that’s the equivalent of removing $20 dollar bills from trees, piling them up and burning them.
Not only do I enjoy growing orchids… but I also enjoy seeing pictures of orchids growing on trees. I imagine somebody in India walking by an orchid blooming on a tree. Do they know how much a picture of that orchid would be worth to me? No. How could they possibly? I’ve never spent even a penny on a picture of an orchid growing on a tree.
Here’s a picture of an orchid blooming on a tree in India. I added it to my favorites… and so did four other people. My valuation of that photo is at least 10 cents. If it was the easiest thing to give the photographer 10 cents then I’d certainly do it. What about the other four people? Is a “favorite” worth at least a penny?
As you can tell I “hearted” your story. So did two other people. But what’s our total valuation of your story? I don’t know. Neither do you. Nobody does.
For me the essence of a market is that people’s spending decisions make their valuations accessible. As a result, entrepreneurs are more likely to make valuable decisions.
The problem is that there are so many spaces where markets are missing. Medium is one such space. So is Flickr, Facebook, Youtube and Twitter. The biggest space is the public sector of course. But it’s entirely possible that all the smaller spaces where markets are missing might add up to a space that’s far larger than the public sector.
As I picture it… a poor person mistakenly walks past a dollar bill… and then past a five dollar bill… and then past another dollar bill… and then past a twenty dollar bill and so on.
For sure let’s get rid of the minimum wage, licensing and borders. But we should also seriously think about the benefit of making everybody’s valuations far more accessible. When everybody’s valuations are far more accessible, everybody’s decisions will be far more valuable.
Kirzner of course has done the most work in the area of entrepreneurship…
Entrepreneurial discovery represents the alert becoming aware of what has been overlooked. The essence of entrepreneurship consists in seeing through the fog created by the uncertainty of the future. When the Misesian human agent acts, he is determining what indeed he ‘sees’ in this murky future. He is inspired by the prospective pure profitability of seeing that future more correctly than others do. These superior visions of the future inform entrepreneurial productive and exchange activity. The dynamic market process is made up of such profit-motivated creative acts in regard to the future. — Israel M. Kirzner, How Markets Work
Because there’s a multitude of missing markets… a massive amount of value is constantly being overlooked.
Hopefully you’ll allocate some brainpower to the problem of missing markets!