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Trying to Create Out of C. Smith an A. Smithian

Here’s a follow-up letter to Mr. Chris Smith who wrote in response to my earlier letter that he didn’t get the relevance of my analogy.

Mr. Smith:

Thanks for your reply.  I apologize for being unclear in my earlier letter to you.  Let me here try a different approach.

Suppose that you’re given the opportunity to select Option A or Option B.  If you select Option A, you get an amount of money equal to the full value of Bill Gates’s net worth ($90 billion).  You can take your $90 billion worth of money in whatever monetary form you like – in dollars, in euros, in pesos, in renminbi, in gold, in whatever widely regarded money you care to name – but you may never exchange any of this money for real goods or services.

In contrast, if you select Option B you get no money, but you do get to create from among all the goods and services currently available on the market a bundle of these goods and services the total value of which is 1/1,000,000th of Gates’s net worth.  (1/1,000,000th of Gates’s net worth is $90,000.)  You get to keep and to use this bundle of goods and services in whatever peaceful ways you like.

If your goal is to select the option that will do the most to increase your material prosperity, will you select Option A or Option B?  I trust that you’ll select Option B, for by doing so your material prosperity will rise  – by about $90,000 – while selecting Option A will increase your material prosperity not one bit.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030