Russell Roberts (2008) "The Price of Everything--A Parable of Possibility and Prosperity".

Miller, Philip

Russell Roberts (2008) "The Price of Everything-A Parable of Possibility and Prosperity," Princeton University Press.

Russell Roberts has made the "econonovel", a book of fiction with an economic principle at its heart, something of an art form. His first novel, The Choice-A Fable of Free Trade and Protectionism is, as its name implies, a novel about the benefits of free trade. His second work, The Invisible Heart-An Economic Romance, tells the story of how a high school economics teacher explains the benefits of capitalism to an English teacher while they forge a romantic relationship. His newest novel, The Price of Everything-A Parable of Possibility and Prosperity, is a tale of spontaneous, emergent order and the role prices and markets play in organizing economic activity.

In The Price of Everything, Roberts tells the story of a boy, Ramon Fernandez, born into central direction but raised in capitalism. Born in Cuba, Ramon was the son of a Cuban baseball star. Because of his father's status in Cuban society, Ramon and his family live among the upper crust, always with enough to eat and with all the luxuries. Life for the Fernandez's could hardly be better.

But during a baseball exhibition, Ramon's father is suddenly stricken and dies. Over time, the luxuries to which Ramon's mother is accustomed are taken away: her home, her job, her social status. She sees potential in her young son, but she envisions Castro taking him and turning him into a baseball player like his father. Realizing that Ramon may not want this path chosen for him and seeking a better life, his mother puts him on a boat and they travel across the sea to Miami where she takes a job as a cleaning lady and devotes her life to raising her son. Cuban dictator (and baseball fan) Fidel Castro, in response, has the memory of Ramon's father wiped clean from Cuban society.

The Price of Everything is set in the San Francisco Bay area after an earthquake. Ramon, who has since grown into a young man and has become a star tennis player at Stanford, and his girlfriend Amy, a Stanford volleyball player, are trying to buy a flashlight. They visit two large retailers: Home Depot and the fictional Big Box in Hayward. Home Depot is out of flashlights. Big Box, on the other hand, has plenty of flashlights. But unlike Home Depot (1), Big Box has announced that they have raised the prices on all of their items because of the earthquake. This, understandably, has upset many people who think it is unfair that Big Box acted opportunistically by raising its prices, taking advantage of the disaster for personal profit.

While waiting to check out, Ramon and Amy have their attention called away towards a mother and her baby. The mother is trying to buy baby formula but finds out that, because of the higher prices, she does not have enough money to make her purchases. The woman is upset and her baby is crying. While Ramon is upset at Big Box's pricing policy, he helps take up a collection among other customers to help the mother buy formula.

The other main character in the book is Professor Ruth Lieber, the Milton Friedman-like the provost of Stanford University and Amy's economics teacher. Similar to characters in Roberts' other novels, Lieber takes on the role of teacher outside the classroom in order to help Ramon understand the role that markets and prices play in people's lives. In the course of the book she teaches Ramon to see that prices help coordinate economic activity and they help steer resources to their most-valued use. She also teaches Ramon that much of the economic order we see is of the unplanned variety.

But before these lessons are learned, Ramon helps organize a protest against Big Box on the Stanford campus in response to their disaster pricing policy. This puts Ruth in an uncomfortable position because not only is Ramon organizing the protest, but he has also been chosen by fellow Stanford seniors to speak at graduation. Moreover, Ruth must deal with Bob Bachmann, a Stanford alum, the CEO of Big Box, and a major donor to the university. Ruth realizes that any protest against Big Box could carry financial consequences for Stanford but she also realizes that as a professor, she also has duties to Stanford's students.

After a meeting about the graduation ceremony, Ruth speaks with Ramon about the planned protest. Surprisingly, applying none of the pressure that he thought she might, Ruth offers Ramon some suggestions about what to do at the protest to make it more effective. But she also warns him that things can go awry, despite the best-laid plans.

The protest goes on as planned, but ends in a riot, with protestors hurling rocks at the Big Box Executive Education Center on the Stanford campus as well as at the Hayward Big Box store at which the opening scenes of the book are set. Public sympathies shift from the protestors to Big Box, a company now seen as the victim of senseless aggression.

After the protest Ruth's lesson begins to sink in with Ramon. Throughout the rest of the book, Ruth and Ramon forge an informal teacher-student relationship as she teaches him about the finer points of rationality and self-interest. She teaches him how those two qualities of human behavior lead to emergent, albeit unplanned, order.

In recounting the experience after the earthquake, she argues that Home Depot did not have any flashlights because they kept their prices low. On the other hand, Big Box had them because they had raised their prices. Their motivation was not to make sure that flashlights got into the hands of people that valued them the most. Their motivation was simple profit. But their actions forced people to determine whether or not they really needed a flashlight. But in acting, some may say, greedily, they solved an important problem that every society faces: how does output get rationed among the citizenry.

Roberts' previous two novels can be used as complementary readings in Principles of Economics courses, and The Price of Everything is no different. There are numerous teaching examples that professors may find useful in their classes. As with The Choice, some readers may find the examples to be too numerous and may find their use cumbersome after a point.

But more importantly, The Price of Everything explains the logic of economics, logic first laid out by Adam Smith in the Wealth of Nations, and used-byeconomists to this day, but without the technicalities of modern economics. Specifically Roberts tells the story of how people, acting in their own self interest, improve the lives of others within society, even though this is not their aim.

The following passage from page 137 nicely sums up the book. Ruth says:

"It's hard to imagine the invisible hand. After all, it's invisible. Leaving things alone, leaving people to their own desires and dreams would seem like the last way to make the world a better place. So most people have a natural disposition for using the government to make things better. It would seem that managing something is always better than leaving something unmanaged. But it's not true. I think the world would be a better place if more people understood the virtues of unmanaged, uncoordinated, unorganized, undersigned actions."

Readers will realize that the writings of Friedrich Hayek are front and center in the book. Readers of the blog Cafe Hayek, co-authored by Roberts and his George Mason colleague Don Boudreaux, will no doubt see the resemblance between the topics there and the topics covered in the book. The short essay "I, Pencil" by Leonard Read (2) also plays a crucial role.

But as noted above, there is a connection between the character of Ruth Lieber and the late Milton Friedman, a connection that Roberts does not acknowledge. Ruth is short in stature and a sharp economist, as was Friedman. After retirement Ruth keeps a home north of San Francisco, as did Friedman. Ruth is an ardent supporter of economic freedom. So was Friedman. Overall, Ruth is a blend of Milton Friedman and Friedrich Hayek.

Roberts' The Price of Everything is his third in a series of stories that tells how markets work to solve problems faced by every society. Roberts skillfully works around the notion that economics is about greed and the notion that economists treat people as cold, calculating, and seemingly uncaring individuals. Yes economics may seem cold and distant, but its foundation is the understanding of rational and self-interested people and the understanding of how to make the world a better place, all despite the misnomer "the dismal science."

Notes

(1.) Roberts notes (in the chapter on suggestions for further reading) that Home Depot has the policy of not raising prices in the event of an emergency.

(2.) Read, Leonard (1958), "I, Pencil" available online at http://www.econlib.org/library/Essays/rdPncl1.html

Phillip Miller

Associate Professor of Economics

Minnesota State University, Mankato