December 15,  2004

While driving my daughter to a musical event recently, I asked what she was reading in literature.  She related the story of a poor family that found its way to FAO Schwartz (presumably before its bankruptcy) and marveled at all the expensive toys.  One family child thought that the thousand dollars for a single toy could feed their entire family for a year. 

The child who regularly shop lifted in order to put food on the table needed to be dissuaded from doing the same in that marvelous toy store. 

I do not know what the teacher wanted her students to learn from that story, but the economics leads to conclusions that I do not believe were intended (and certainly were not expressed) by the author. 

Stealing is a method of distributing value, not creating it.  Furthermore, to the extent that those subject to theft seek protection to preserve some of the value they created, the act of theft actually lowers the well being of a community.  Resources that could have been used to create value are needed to protect it instead. 

Of course, I could also mention that the creation of that expensive toy put food into the mouths of other families who produced it.  That thousand dollars went back to store owners, truck drivers, utility providers, toy producers and even fiber growers or gatherers, assuming that fiber was used in the toy.  A thousand dollars spent is a thousand dollars of income somewhere in the world economy. 

But why should those people build expensive toys instead of grow more food, build more houses, or provide some other “more worthwhile” economic endeavors?

Indeed, my daughter asked why buy the toy instead of contribute to some charity that would help the poor.  Given those two choices, I would do the latter, and she automatically assumed charity over expensive toys should be the right choice for everybody. 

But everybody is different.  What if the purchaser of that toy was motivated to provide something special for his/her child by working harder?  Could that harder work be on a vaccine?  Could it be on a technological breakthrough that betters the world?  Could it be on some art that uplifts a community?  I do not know. 

What I do know is that the purchaser of that expensive toy created something perceived to be of sufficient value by someone who provided the income needed for the toy’s purchase.  I also know that if markets are functioning efficiently, if sufficient opportunities are offered to all, and if initial endowments do not exclude some from progressing, then that thousand dollars of income probably created more value than an equal donation coerced from the would be toy’s purchaser and given to the poor family. 

As a human, I grieve for the children who go to bed hungry.  Although the UN estimates that starvation has fallen by 9 million worldwide in the past decade, even as the world’s population has soared by almost another billion, far too many are dying of starvation.

As an economist, I seek solutions in improving market performance (removing monopolies and price distorting activity), creating opportunities (removing social restraints like discrimination, health problems, and ignorance), and providing sufficient access to resources so that those who desire to create value see a path that they can travel to get there (educational access and credit availability for bankable efforts). 

I know that the easy solution of taking from those who have to provide for those who have not will reduce the efforts of the haves.  Furthermore, there is little evidence that it will increase the efforts of those receiving the charity (except to the extent that some of those economically distorting problems are addressed). 

Personally, I think we have too many things. If those things are what motivate others to do their best, then I will marvel at their toys. 

This is the answer I gave to my daughter.  I do not think it was an A answer, but I believe it was the correct one. 


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