Note from the author: I distinctly remember when I interviewed at Monmouth College. President Haywood told me that if he hired me, he expected me to spread the teachings of economics to those who did not already know economics. He said something like "Spread your light to those who need it most. Teach the students, the college community and the public. I do not want you to spend your time writing technical journal articles for other economists."
This philosophy of education inspired me to come to Monmouth College and I have tried to follow his advice. I have published articles in the Chicago Tribune, the Philadelphia Inquirer, the Miami Herald and other local and regional newspapers. Over the years, I have given lots of talks to local civic groups and business organizations.
In my first year at Monmouth, President Haywood published a piece on higher education containing this quote: "The path to academic specialization, studying the writings of narrow specialists, is a ladder within a windowless tower." I saved that quote and put it on the bulletin board in my office. It has been there for close to 20 years. I do not think I have ever heard anyone articulate the virtues of liberal arts education better than Bruce Haywood.
I have always tried to teach using examples and stories that students find interesting -- at least, I find them to be interesting. I think that is one of the reasons that my Introduction to Commerce is popular with students. I have lots of alums tell me "I still remember your stories." I hope that they also still remember the point of the story.
Here is one of those stories.
Business Is Pickin’ Up
By Mike Connell
Political Economy and Commerce Department
Promotional imagery from HISTORY’s original series, "American Pickers." Mike Wolfe (L) and Frank Fritz (R). Credit: ©2009 AETN / Photo Credit: Joey L
Winter’s long nights have become less bleak since the History Channel began airing new episodes of “American Pickers.” Mike Wolfe and Frank Fritz are modern day treasure hunters exploring America’s backroads and enjoying freedoms that many Americans can only dream about -- self-employment and the serendipity of the open road. In addition to allowing couch potato voyeurs to share their adventures, the show provides a behind-the-scenes peek into small business in America. It turns out that the real world of commerce is not at all like the textbook theories at State U business school. America can learn important lessons about business from the Pickers. As Yogi Berra supposedly said “You can see a lot just by looking.”
The most fundamental economic lesson to be learned from the Pickers is the origin of value. Many people do not understand that all value is subjective and comes from the buyer valuations, not the seller efforts. Old bicycle frames and rusty signs are valuable because they bring pleasure to some real person. There is no such thing as intrinsic value. All objects of value derive their value from the human who desires to possess or use it. A Packard hood ornament is only a hunk of metal until someone loves it. Value is not dependent on how much or how little you paid for an object or how hard someone worked to produce it. In the real world, every object is only worth what a willing buyer will pay for it; no more and no less. Lest you doubt lesson one, talk with the Las Vegas home owner with an upside-down mortgage or an artist with a painting that he cannot sell.
Picker lesson number two is how to create wealth via market exchange. Since all value is subjective and each person has different values, moving objects from place to place and person to person creates value. Mike and Frank are wealth creation machines. In the world of commerce, wealth only comes from one of three actions. Steve Jobs can create coveted new objects that heretofore did not exist. Or production-based enterprises can increase the quantity of existing goods and services. And finally, eBay or the Pickers can move the existing supply of goods from less valued uses to higher valued uses, thus creating wealth in the process. TV viewers bear constant witness to the fact that every transaction between voluntary participants adds to the total wealth of our society. The happy Pickers always ride off down the road with a van full of treasures while grateful sellers wave good-bye with a handful of welcome cash – winner, winner, chicken dinner.
Even in a pre-Pickers condition, everyone knows that knowledge is valuable, but few understand exactly why. Fredrich Hayek won a Nobel Prize for pointing out that in the real world information is dispersed, limited and costly. In other words, no one knows everything, it takes time and energy to learn things, and people frequently make mistakes. Imperfect information creates a work of risk and opportunity. This crucial but often misunderstood insight makes much of modern commerce possible. Mike and Frank know things that others do not. It took them years to acquire this specific knowledge and build their peculiar brand of human capital. They use this knowledge to spot a long-lost Harley Davidson bicycle sprocket in a pile of junk. Who knew it was there and who knew it was valuable – the American Pikers with their specialized knowledge and backroads explorations. But there are other things that these information-constrained Pickers do not know and therefore some would-be bargains get overlooked. Imperfect, costly information creates valued economic roles for entrepreneurs. The economic process is the same whether the middleman is digging through an old barn in Indiana or analyzing IPOs in China. The firm of Fritz and Wolfe has incurred risk by investing resources in a retail shop, a van and Danielle-flavored personnel. Their human capital enables them to hunt, identify, transport and centralize history’s artifacts to make others happy and earn a profit for their efforts; creating happiness for others is the primary function of all business enterprises.
Behind the scenes of every “pick” lies a crucial set of legal institutions. Even in a Nebraska cornfield, commerce is not possible without the rule of law. At all times, property law protects the two fundamental rights of ownership – the right to control an object’s use and the right to transfer that control. When the Pickers uncover a new treasure, the current owners are often not using it “wisely.” But outsider’s approval of the owner’s actions is irrelevant. It is the owner’s right to use his property as he damn well pleases; that’s the essence of liberty. It is part of what Jefferson called “the pursuit of happiness.” The show also teaches us that the current owners have a legal right to sell or not to sell their treasures for the Pickers’ offered price; it is the sacrosanct right of the property owner to say no to any and all purchase offers.
However when agreements for exchange do occur, the TV viewers watch as contracts arise. Both parties are now legally and morally bound to fulfill the good-faith promises they have made. Often, but not always, the parties shake hands as a symbolic acknowledgement of the legal relationship they have just created. One crucial rule of contract law underlies every Picker’s handshake – “absent fraud or coercion, the law will not inquire as to the adequacy of the consideration.” Whether the price is “too high” or “too low” does not matter in court. A deal is a deal regardless of the price, and the law respects the freedom of adults to make exchanges on the terms of their own choosing. Mike and Frank often grab the jackpot at the rainbow’s end at a bargain price but sometimes the gold is a costly illusion. Either way, the contract is just as binding.
Perhaps the biggest lesson we learn from the Pickers is not about commerce at all, but is about liberty. The Pickers and the eccentric individuals they encounter have chosen lifestyles that the viewers at home have not. They have taken the road less traveled and it has made all the difference. Our right to pursue happiness down the road less traveled is assured to us in the Declaration and is one of our most cherished possessions.
While textbooks can be deadening, the Pickers make commerce come alive. Beneath the law’s protective umbrella, these entrepreneurial cowboys make investments, take risks and acquire human capital in order to offer goods and services that willing buyers find valuable. Because information is incomplete, costly and dispersed, there is a crucial role for middlemen to create wealth by finding hidden treasures and then moving them from lower valued uses to higher ones. On Monday evenings, we, the timid, can sit in our living rooms and watch commerce conducted in the junkpiles of our nation. America should celebrate our entrepreneurs and the Pickers search for rusty gold.
Now, does anyone know where I can find a set of hubcaps for a ’32 Studebaker?
This op-ed ran in the Sunday, February 26, 2012 edition of the Quad City Times newspaper.