Book Review: Russell Roberts's 'The Price of Everything'
Take a look at the computer screen your eyes are presently (hopefully) fixated on, not to mention the computer mouse you used in order to click on this posting. Did you ever consider how both were made? Could you make either yourself, and if so, how and where would you acquire the various raw materials and parts in order to create them?
If the above questions vex you, then George Mason economics professor Russell Roberts’s excellent new novel, The Price of Everything, is for you. Importantly, Roberts does not explain how things are made in this tale as much as he teaches us through a very interesting dialogue between a professor and student that the “whole system we call a market economy works as well as it does precisely because of how little we have to know.”
Thanks to the modern division of labor that is happily comprised of more and more self-interested individuals the world over, the average person can “know very little and still look like a genius.” And when we’re allowed to freely exchange the fruits of our work specialties irrespective of country border, the range of life-enhancing goods we're able to access grows exponentially. In short, the self-sufficiency that the protectionists in our midst sell us is in the words of Roberts, “the road to poverty.” That is so because we couldn’t possibly make all that we now enjoy without myriad inputs from around the country and around the world.
Roberts’s story takes place at Stanford University in Palo Alto, CA. On the night of an earthquake, Stanford senior and Wimbledon Men’s finalist Ramon Fernandez goes with girlfriend Amy to a local Home Depot to buy flashlights due to a power outage in the area. But with flashlights sold out, Ramon and Amy have to travel to the nearest Big Box.
Flashlights and all manner of goods are plentiful at Big Box, but in response to the post-earthquake surge in demand, Big Box has chosen to double the prices of its most desirable products. Ramon and Amy buy the marked up flashlights, along with batteries and milk, but Ramon is none too happy, and he flies into a rage when he witnesses an immigrant mother being gouged for baby food and diapers.
Soon enough Ramon is leading a protest outside Big Box, and thanks to his notoriety as one of the best tennis players in the world, a variety of local activists, including the grizzled Heavy Weather, attach themselves to his cause. A demonstration is planned at Stanford, and the problem for the school is that Big Box and its CEO are major financial supporters.
At this point, retiring Stanford provost and economics professor Ruth Lieber enters the picture. Amy is a student of hers, and Ruth’s lectures about the remarkable organization that occurs free of bureaucratic oversight is beginning to interest her. One of Lieber’s examples involves the creation of a simple pencil, and in noting the wide array of individual human action that results in one, she shows the class that spontaneous specialization is in fact highly organized.
And what organizes all this remarkable symmetry? It’s not a government appointed director, or a pencil “Czar” if we’re to use present Washington lingo; instead it is prices. Ruth explains that “prices steer resources around the economy” and they “send signals to suppliers in the economy to expand or reduce what they’re making.”
But with a protest against one of Stanford’s biggest benefactors looming, and an even larger donation possibly hanging in the balance, Ruth has a problem. She figures she can’t stop the demonstration against Big Box, but perhaps she can get to know Ramon and in talking to him she can lightly show him the wonders of the profit motive.
Luckily Amy had already told Ramon about this interesting professor, and due to a meeting meant to discuss graduation ceremonies at which Ramon is to speak, Ruth has her opening to get to know him. And from there a series of “chance” encounters between Ruth and Ramon occur.
What’s fun is that since this is a novel, Roberts is able to explain economics within an intriguing storyline. Ruth in no way demands that Ramon cancel the anti-Big Box demonstration, and her failure to do so serves as a positive lesson for him; one in which he develops a greater trust in her wisdom.
And in the series of meetings that follow, both Ramon and reader become the recipients of an engrossing economics lecture told in story form. Ramon lauds Home Depot for not gouging consumers during a time of need, but rather than argue, Ruth acknowledges that “They didn’t profit from you. But then again, they didn’t save a flashlight for you either.” Big Box perhaps “gouged” him, but they also had what he was looking for.
Ramon decries a profit-based society in which the “poor get the dregs”, but instead of running from what is a very real (and positive to this writer) wealth gap in this country, Ruth shows him that what’s important is the lifestyle gap between the rich and poor. Indeed, 100 years ago the vast majority of Americans lacked central heating, or refrigerators or cellphones, whereas today, rich and poor alike generally enjoy all three.
Ramon is the son of a deceased baseball great from Fidel Castro's Cuba, and a Miami-based mother who cared enough to get him out of the country as a child after his father died. But when he defends Cuba for being a “fairer society”, Ruth reminds him that “Traffic only flows in one direction. To America. Nobody’s swimming south trying to get into the worker’s paradise.”
When Ramon suggests that his generation perhaps values happiness over money, Ruth doesn’t so much chastise him as she reminds him of the undeniable good that results from the profit motive. From her standpoint, “Without money and the motivation it provides, we’d have no idea how to serve our fellows.”
And to show him how the drive for profits is highly compassionate, she tells the story of an Israeli entrepreneur who spent twenty years developing an artery-clearing device that did not require open-heart surgery. The entrepreneur did this for profit, but the compassionate result was that many lucky recipients of his innovation got to live longer.
Ruth’s various encounters with Ramon naturally lead to graduation, and the question of whether he’ll use the forum to bash Big Box, and in doing so, possibly create a fundraising problem for Stanford. But rather than ruining a good story, readers would do best to buy a novel that combines an interesting storyline with essential economic lessons.
Indeed, central to Roberts’s book is that market prices bring order to our actions. “Play with prices and you will bring disorder.” A more important statement could not be made, and not just to the casual reader, but to a Washington political class eager to play with all manner of prices in order to “fix” our economy. That being the case, is it any surprise all the disorder presently in our midst?