Entrepreneurial economics

by Russ Roberts on March 12, 2009

in Markets in Everything

Economics teachers sells ad space on his handouts. (HT: Jeff Bliss)

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vikingvista March 12, 2009 at 11:36 pm

What a great idea. I'm surprised the school let him tarnish the pristine and noble practice of education with crass capitalism.

TrUmPiT March 13, 2009 at 5:02 am

I've occasionally wondered by how much the consumer would benefit if we could eliminate middlemen, advertising costs, CEO joke salaries and bonuses, etc. The fact is that we can't completely eliminate these things, but they should be minimized as much as possible to … hmm, maximize PROFITS. Notice that I didn't say reduce prices for the consumer. Reducing prices to my liking would entail lowering profits, I'm afraid. This is supposed to happen through competition … Is competition supposed to be FUN? Please elaborate, if you think so. Anyway, if only we could take the 1st derivative of the cost equation, set it equal to zero and solve. Minimizing is such FUN! If we could just set CEO salaries equal to zero, it would simplify the equation by one variable making it easier to solve (not really with computers doing the mindless number crunching).

I buy a lot of stuff on Amazon because it is convenient, even though the prices aren't the lowest out there. I wonder why their prices aren't lower? Amazon his greatly reduced the overhead costs of a running a retail outfit. They don't have the pay the huge rents charged by the local mall; instead they pay the much low costs of warehousing merchandise. Amazon's advertising is also minimalistic – no large and expensive newspaper ads that I've ever seen. So the conclusion I've reached is that Amazon's founder and CEO Jeff Bezos is a monoplistic billionaire that is raping the consumer. Right, I don't have to buy from him, and I'll help put him out of business. I can also type in "rape" into the search field on Amazons intro web page and get a slew of books and movies that have the word in the title or description. Not one of those books or movies will call Bezo the rapist that he is. So I'll have to do it anonymously on this website. Oh, I know that I don't have to, but it's so much FUN!

vidyohs March 13, 2009 at 8:01 am

I had the thought that, while I as a parent, would not object to seeing my kid bring home a handout with an ad on it, I would object to having my kid handed a test with advertising printed on it. Deliberately placing distractions on a test paper would be immoral and counter-productive.

Beyond that I applaude the teacher for his originality. I believe that there are better ways to increase his budget for paper but my ideas would involve firing a lot of union deadweight and diverting the money saved to actual classroom instruction and supplies.

Last, I could not help but wonder what one would find if one could sit down with this teacher and explore his personal ideas, ideas transmitted to his students, about free markets, capitalism, and economics.

For instance would he see his idea and actions as proof of the need for government to stay out of the markets? Or would he see it as…….?

Dustin Santos March 13, 2009 at 11:39 am

I think it`s a really simple yet amazing idea. One could even think of relating the class topics to the advertisements. I.e. history class with museums, art expositions, music with opera concerts, pop music concerts, private music classes etc. As long as the ads don´take so much space that they would actually distract the students.

But behind this is the other side of the coin, that if this actually caught up, and competition begun its magic (in free markets) other relative cheap products like newspapers and magazines would began to rise their prices. Or even worse government would step in and subsidize some of this companies…

I don´t know maybe everything would be ok in the long term given the creative -destruction process… but the concept of efficiency and maximizing the use of any resource in this case, – paper – should be endorsed. What do you think?

vikingvista March 13, 2009 at 12:02 pm

"I buy a lot of stuff on Amazon"…"call Bezo the rapist that he is"

What do you call someone who chooses to be repeatedly "raped"?

"Defamer"? "Liar"? "Sophist"? "Illogical"? "Antisocial"? "Ignoble"? "Base"?

BoscoH March 13, 2009 at 12:20 pm

This is unfair to all the other teachers and should be stopped. What will happen to our public schools if teachers can get around their paper quotas by commercializing the classroom? What will the children learn? It won't be long until they start selling advertising on their term papers.

Nick March 13, 2009 at 12:36 pm

I was just curious:

Are public schools nonprofit and if so, does this violate their nonprofit status?

vikingvista March 13, 2009 at 12:53 pm

"selling advertising on their term papers"

Another very good idea.

What a truly wonderful tool advertising is for wealth creation. The profitability to those selling advertising space or time reflects the barrier to economic efficiency caused by limitations of information transfer. The extent of investment in advertising seen in a free society illustrates the tremendous value of communication in finding efficient mutually beneficial transactions.

Lack of omniscience in a society is an economic barrier that advertising seeks to lower.

TrUmPiT March 13, 2009 at 1:29 pm

"What do you call someone who chooses to be repeatedly 'raped'?"

I call myself a victim as are the rest of the people who buy on Amazon or use a Microsoft Windows operating system. It is difficult, or impossible, to avoid being victimized by monopolies. You, too, have been raped repeatedly, even today, even as I type. The sick part is that you enjoy taking it up the you know what. Who's the passive, lie-there-and-take-it crazy one?

MnM March 13, 2009 at 1:51 pm

I call myself a victim as are the rest of the people who buy on Amazon or use a Microsoft Windows operating system.

And who forces you to buy from Amazon or use a Windows operating system?

vikingvista March 13, 2009 at 1:59 pm

"I call myself a victim"

Seeing as you admitted you did not have to buy from Amazon, and could get similar prices at other stores, it would appear as though you are a victim of yourself. People who accuse others of their own crimes are one of the lowest kinds scoundrels.

If you want to enjoy your better Amazon-free world, you can do so, by not buying from Amazon.

As for the rest of us who do not lie about the value that Amazon's convenience gives us, we will continue to, if necessary, pay a premium for that value–at our discretion.

Mesa Econoguy March 13, 2009 at 2:28 pm

I call myself a victim as are the rest of the people who buy on Amazon or use a Microsoft Windows operating system.

Yeah! Fight the power! Stick it to The Man! Other mindless “anti-establishment” slogans!

While windows certainly does suck, there are alternatives, no thanks to government. Which ones become useful and prevalent is decided by the marketplace, as well as which ones fail.

Strumpit, that is not for you to decide, for a variety of reasons, not the least of which is you’re quite dumb, a la muirgeo.

That is why choice is such a wonderful thing – if I hand you a loaded gun, which you choose to point at your face, and you intentionally or accidentally discharge the weapon, well……

BoscoH March 13, 2009 at 2:40 pm

Strumpit, that is not for you to decide, for a variety of reasons, not the least of which is you’re quite dumb, a la muirgeo.

That's not fair to muirgeo. George is more naive. He's certainly not stupid since he is a pediatrician. TrUmPiT sounds like he's living in Mom's basement.

Mesa Econoguy March 13, 2009 at 2:58 pm

No, muirgeo is probably the dumbest person, or one of them, on the internet, and I mean that sincerely. Strumpit isn’t quite there.

I was talking with Methinks offline about this the other day, and I’m quite convinced that much education actually can make you dumber, particularly in areas insulated from reality. Even if he is a doctor – I do not believe he is – it should be unsurprising that what may seem to us as a rigorous level of training (it’s not) could produce someone so dim.

I find myself now abruptly concluding conversations with “that’s not what’s going on here.” So many people do not understand, and lack the ability to reason critically (that’s no longer taught at university), that it’s futile to even engage them. George is one of those unfortunate enough to have “top-down,” i.e. fake, intelligence, manifested by repetition of “learned” sequences, but that’s not understanding or intelligence (some AI folks will disagree with me here), it’s repetition.

M Heiss March 13, 2009 at 4:16 pm

This is a great idea. The businessman is clearly getting a tremendous bang for his buck — getting picked up on "the Internets" like this, for about $300 outlay.

The kids can have a grin in class.

The teacher really benefits: his need for paper is met; he found a clever, non-government workaround for a problem he encountered; very likely he is tweaking his superintendent (always good); and he is bringing publicity to the school district for a clever and humorous situation.

Nobody's taxes were raised.

Everybody wins.


vidyohs March 13, 2009 at 6:38 pm


Re: Your above comments regarding programming Vs intelligence using muirduck as an example.

Add me to the group and make it tri-legged because it is exactly correct.

I began to notice the phenomenon back in the 70s when I was still in the Navy. Shipmates alongside me that were startlingly intelligent in a field, but dumber than a box of rocks when taken out of that field. When I talked with them in depth outside the field I pretty quickly pinpointed the fact that they had no education or experience of any note that concerned the real world, I am talking about hands on dusty dirty experience; and, their perspectives all seemed to be taken from TV shows or movies. It was pitiful.

I eventually termed it "tunnel intelligence" just to have a label. In the tunnel the person is intelligent, imaginative, and uber-competent, taken out of the tunnel and they are lost.

After the PC became so prevelant I began to associate those people with a PC. One can be programed to do wonderous things but it will never perform even the simplest individual voluntary intellectual manipulation of any data. muirduck is like that (all socialist seem to be).

muirduck is one of those, and I agree with you and Methinks on this issue. Regarding the educational system as I see it today I find it easy to understand how those people arrive in the workforce the way they are, and I fear it is going to become even more common as schools teach to tests, teachers indoctrinate instead of teach, and parents continue to turn their responsibilities over to electronic media. Kids today have the same brain power as kids of 1885, it is just that most of todays kids have no idea of how dust is formed, why there is no rain in a drought, how a food plant germinates, grows, and produces, I am talking about a whole world of knowledge that they never get and will never get.

This loss of connection to the real world may seem trivial at first but it is why so many are duped into believing in such things as global warming…because they have no knowledge or perspective to off set the lies. They can be easily convinced that the free markets failed in the housing bubble pop, because they don't have the slightest idea of what a free market is.

As an example based on his past posts, muriduck would tell you that nature is nurturing and all about cooperation. His kind will look at a field or forest and see everything "living in harmony"; whereas, myself (countryboy) I see nothing but competition and species combat. Nothing in those forest or field cooperate, they all compete for the resources, even within the same species. One corn plant does not cooperate with the two that are closest to it in the row, it competes for the water, the sunshine, and clean air. In the forest the Oak is not nurturing the pine tree next to it and it is not cooperating, it is competing.

Once in a rare while one will find two different species living in a symbiosis, but this does not prove nurturing cooperation of one species for the benefit of the other, it proves one species acting for its own benefit through sharing something (maybe just presence) with another species.

I see people like muirduck and I know that there is a whole body of knowledge he has no clue about and I feel sorry for him in a way because he has that hole in his brain and doesn't know it.

I have said and I say again, capitalism is as natural to human individuals as is breathing, eating, drinking, and sex; and, capitalism begins with the individual at the individual level and there is no denying that. I know this not from advanced text books or scientific study, I know it because I could see it in action all around me, it only took the perspective of a countryboy to understand what I was seeing.

Capitalism does not exist without profit and profit is very individual and personal at its root level. One can not separate the root from the plant; root, stem, trunk, leaves, and fruit are all part of the same organism. One can not separate individual profit from the most advanced and sophisticated stock markets; they are part of the same organism.

I am getting off track, except in that I am talking about body of knowledge that so many people do not have and have never figured out.

I definitely expect the occurance of tunnel intelligence to increase because so few people experience real life in the streets in establishing, organizing, and administrating a business. Plus the people are deliberately (IMHO) enculturated to not trust or rely on their own thoughts or wisdom (this is something that has been going on for some 60 years now). Trust the community, trust the state, trust the government, all of those are more knowledgable than you as an individual…..well bullshit!

In the case of muirduck we see not only tunnel intelligence, but tape-deck intelligence as well. Tape-deck intelligence, record, play, rewind, play, rewind, play, rewind, play, rewind. You see a lot of that in Gil and now STrUmPiT and T.L.Holaday.

Sam Grove March 14, 2009 at 11:48 am

I don't think Windows sucks. Certainly it's not perfect, but you must consider that Microsoft does not build the computers that Windows is installed on.

Apple has a huge advantage in that the OS is always matched to the hardware because both are built by the same company.

OTH, Windows is installed on thousands of different hardware configurations made by many different manufacturers.

It's amazing that it manages to work at all.

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