Friday, July 10, 2009

The economist's volcano

I went and read another bit of a book written by an economist, and after another chapter of him displaying what I wish were a bad parody of economist behavior, this illustrative scenario occurred to me.

Suppose you have a magic volcano. Not just any volcano; a special magic volcano. When you throw someone into the magic volcano and make a gainful wish, it calls up two immortal beings: An actuary and an economist.

The actuary tells the volcano how many years that person would probably have lived; the economist looks up the current estimated GDP per capita and current market prices of every commodity and manufactured good. Since this is a magic volcano, it can do multiplication, so it takes the GDP per capita and multiplies it by the years of remaining life that person was expected to have.

The next morning, on the slope of the volcano, you'll find whatever you wished for, in whatever quantity, to the market value of that much money - a whole productive lifetime of money right up front, and maybe that particular person wasn't that productive. The volcano doesn't care if they're a hard worker or chronically unemployed.

So, is throwing people into the volcano an act of public good sometimes, most of the time, always, or never? It's certainly a positive economic benefit more often than not, defined in terms of financial value or productivity. Would you want to throw someone in the volcano? What do you expect should - or would - be done regarding this volcano if the news of its abilities spread far and wide?

There's a point to prosperity. I just don't think it's especially important once you've figured out how to keep people alive and well.

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