Cartoons, Capital, and Competition

by Don Boudreaux on July 11, 2007

in Balance of Payments, Competition, Cooperation, Seen and Unseen, Trade

Here’s my latest column in the Pittsburgh Tribune-Review.  In it, I draw an economic lesson from The New Yorker’s weekly cartoon-captioning contest, in which people are invited to submit captions to accompany uncaptioned cartoons.  My vanity compels me to quote at length from the heart of the article.

Think of each uncaptioned cartoon as a capital good. It has the potential to create value (in this case, to make readers laugh). By itself, though, this capital good produces almost no value; without a caption, each cartoon is virtually worthless. The cartoon becomes valuable — it contributes to human satisfaction — only when a clever caption is added to it.

Suppose for a moment that The New Yorker allowed only residents of Manhattan to submit captions. No doubt many submitted captions, when added to the cartoons, would produce the intended humorous result. But editors of the magazine could not be certain that the best possible caption was submitted.

What if, for a particular cartoon, someone living in Brooklyn had an even better idea for a caption? By prohibiting non-Manhattanites from contributing their caption ideas to the cartoons, the caption that would have been submitted by the person in Brooklyn — the caption idea that would have added to the cartoon even more value than is added by the best caption from Manhattan — never is added. Thus, the cartoon — this particular capital good — fails to produce as much value as it would have produced had Brooklynites been among those who were permitted to submit captions.

Sadly, though, no one ever learns this fact. The winning caption submitted from Manhattan might be judged by everyone to be excellent. But because the even better caption from Brooklyn never materializes, no one ever discovers just how funny that cartoon could be.

If the goal is to ensure maximum value of this particular capital good (a weekly uncaptioned cartoon), clearly it is advisable to have larger, rather than smaller, numbers of people able to try their minds at devising clever captions. With everyone in the world free to contribute captions, each cartoon is joined with cleverer and more creative captions than would be the case if only Manhattanites — or only residents of New York state, or even only Americans — were allowed to submit captions.

The very same process is true of factories and machines and workers. It might be that the entrepreneur with the best idea for how to use a particular factory and its machines and workers to produce maximum value is an American. But fewer than 5 percent of the world’s people live in America. So it is inevitable that the best and most creative ideas for how to use particular assets that are located in America will often be possessed by non-Americans.

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{ 9 comments }

vidyohs July 11, 2007 at 8:47 am

Don,

There are many reasons why they would restrict the contest to strictly Manhattanites. Foremost among those reasons is the discomfort at the discovery that many outside of Manhattan are more clever than those in Manhattan.

By restricting the contest the promoters never have to undergo the discomfort.

Next I would suggest that Manhattanites would be displeased to see the rewards going to outsiders because that would reduce their personal level of material comfort. In their minds having that reward going outside Manhattan and not being kept in circulation within Manhattan, all Manhattanites lose.

Since WWII we Americans have lived a life of complete material fantasy compared to most of the world. With total globablization having occured years ago we are going to have to accept that our life styles are going to slip backwards a little in order for us to stay competitive. No longer are the common worker going to be able to afford those wonderful toys that they all think they must have; but in truth are no more than ego stroking possessions.

M. Hodak July 11, 2007 at 9:08 am

So, are you saying that protectionism is a laugh?

Jon July 11, 2007 at 9:42 am

Alas this doesn't seem to phaze statists who hold up a flag and demand that they should internalize more benefits than a person holding up a different flag.

Mr. Econotarian July 11, 2007 at 11:18 am

"No longer are the common worker going to be able to afford those wonderful toys that they all think they must have"

There is no evidence that this is happening or should happen with globalization. If anything, the production of many cheap goods outside the US will enhance the lifestyle of "the common worker," however "the common worker" in the US might have to go to college to expect to continue to have a good lifestyle.

pukuna July 11, 2007 at 12:31 pm

really inspiring.

Shakespeare's Fool July 11, 2007 at 1:36 pm

But more captions submitted raises the cost of the contest.
Have you figured out whether the costs of creation, submission, and judging are outweighed by the increased value produced?

Brad July 11, 2007 at 2:26 pm

Shakespeare's Fool hits the weakness with this analogy on the head. A cursory reading of the excerpt got me wondering if you were making a case for open source software instead. Everyone can play, but there is an inordinate amount of garbage produced, and finding the rare diamonds is a real effort. In the commercial software world, developers have to be pretty explicit about the value they're delivering in order to thrive.

It would be interesting to see something like The New Yorker's cartoon captioning contest, which drew upon the audience to do all (or most) of the filtering as well.

Reach Upward July 11, 2007 at 5:15 pm

I agree with Shakespear's Fool. The main problem with opening up the contest would be the added cost of screening. Now, if the public were invited to screen captions on the paper's website and vote for the captions they like best, perhaps that would actually reduce the cost of screening while simultaneously delivering a superior product.

Hmmm, come to think of it, maybe there are lots of ways for companies to open up processes to both reduce costs and improve quality.

vidyohs July 12, 2007 at 7:31 am

Mr. Econotarian,

The words 'common worker' are the clue. You are right, in the uncommon worker things are proceeding pretty much as they always will with uncommon people.

However for the 'common worker', I know personally and see many more this breed and when they lose their employment due to changes in business and manufacturing brought on by globalization, they sit among their toys (bought on credit) whimper, suck their thumb, and cry out for government to increase protectionism in any way it can.

Shakespear's Fool has a point but it is not enough to contradict what Don has pointed out. Yes there would probably be increased costs in opening the caption contest, but will the costs outweigh the probable benefits? The increased costs can be pretty much predicted and would be minimal, been there and done that in situations similar. But, what can not be predicted is the probable degree to which the benefits would be increased. The minimal extra costs could quite likely bring enormous rewards.

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