Study Questions for The Price of Everything

by Russ Roberts on April 5, 2011

in Books, Uncategorized

Steve Horwitz uses my book, The Price of Everything in his class as an opportunity for extra credit. With his permission, here are the questions he uses with students. Feel free to use them if you find them useful.

1. At the end of chapter 2, Ruth insists that despite the fact that companies have bosses, “no one is in charge” and that no one sets the price of goods and services. Explain what she might mean by that and how it relates to our discussions in class.

2. In chapter 4, Ruth claims that the flock of birds as a whole is smarter than the smartest bird in the flock. What’s the equivalent claim about how markets work? Give an example.

3. At the end of chapter 4, Ruth engages the class in a discussion about “price gouging” and price controls. Use supply and demand curves to illustrate her point about gas prices after Hurricane Katrina.

4. In chapter 6 (p. 73) Ramon says “But I want a world where flashlights are both cheap and available! Why can’t we have both?…You’re the economist. Tell me why we can’t do better.” How would you answer Ramon?

5. Explain the distinction between “pro-business” and “pro-market” that Ruth invokes in chapter 9 (p. 123). Why do you think people confuse those two ideas? What do you think of Ruth’s answer to Ramon?

6. On p. 135 in chapter 10, Ruth analogizes economic evolution to biological evolution, but she’s careful to note that unlike genetic mutation, “economic evolution isn’t random.” Why isn’t it? What makes it possible for individual humans, firms, and households to engage in economic behavior that isn’t random? How is it that even as they are all very “purposeful,” the outcome of their actions reflects none of their intentions?

7. Later in chapter 10, Ruth says “As we destroy jobs, we get wealthier.” What does that mean? Give an example other than the ones Ruth provides.

8. Who or what is the “weaver of dreams?” Explain your answer.

9. What did you think of the book overall? Did you like it or not? Did it help you understand the course material? What worked and what didn’t?

10. Do you think the book was valuable enough to be required reading the next time I teach the course? Why or why not?

11. BONUS QUESTION: on p. 156, Ruth struggles with a crossword puzzle clue. What’s the right answer that she can’t get? Why is this absolutely the funniest moment in the book?

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Daniel Shapiro April 5, 2011 at 7:31 pm

Thanks to Steve for putting these up. I wonder if any noneconomists have used your book, Russ. I have a dream of using it in my Social and Political Philosophy course as a way of teaching economics to noneconomists

Gil April 6, 2011 at 1:01 am

Business evolution is no different from biological evolution. No female mates with the first male she bumps into but choose the one she finds most attractive. It’s the same the way a great many people are single – they’re being choosey.

SaulOhio April 6, 2011 at 5:33 am

I just found it on Kindle. Couldn’t find it the first time I looked. I’m going to download it once I finish “Human Action”.

Captain Profit April 6, 2011 at 12:05 pm

> unlike genetic mutation, “economic evolution isn’t random.”

Apples and oranges. Genetic mutation is essentially random, as is, say, taking a chance on a new shop or restaurant or credit derivative. Evolution is driven by the natural selection of favorable traits, which comes afterwards.

Seth April 6, 2011 at 3:27 pm

I don’t officially teach economics, but I am going to use these on the folks who I get to read your book. Thanks.

#11 points to a great bit of humor in the book. I named my kayak after the first name of that actress.

I’d like to discuss #6 more. I must think economic evolution is much more random than Ruth.

NonEcon April 6, 2011 at 10:10 pm

Economics is a lot like Lamarckian genetics. Goods and services tend to adopt the traits of their parents in response to their environment.

Truly random evolution in economics would lead to some pretty obscure failed endeavors, such as pickle racing or toilet paper washing services. Instead, the scarce resources are allocated in a reaction to the conditions around them. The invisible hand is not random, and neither are the decisions consumers and suppliers make.

BTW, if anyone make any money raising racing pickles, remember where you heard it first…

Seth April 7, 2011 at 12:35 am

I was thinking that maybe the feedback response of the conditions might be what makes it non-random. However, I’ve seen enough products and services emerge from accidents that I’m not so sure.

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