Thursday, August 21, 2014


I cannot be certain that this marks the end of Vladimir Putin but the man is apparently closing some of the Moscow McDonald's.

I walk by the local Whole Food's on my daily trek and see how they proudly display their "locally grown" and "from farm to table" credentials.  Many other markets and restaurants do the same. From Moscow to LA, the romance is apparently easier to grasp than comparative advantage and gains from trade. But Marco Polo and all those European explorers celebrated in grade school history were paid to find trade routes.

It is more than gains from trade comparative advantage. Economizing on transport and emissions is not enough.  All resources are to varying degrees scarce. How do we trade these off against the personal preference orderings that each of us value?
The story of how markets have allocated scarce resource in such a manner that there are more people than ever on Earth and most of them live better and longer than their ancestors sounds pretty romantic too. "In France, at the start of the industrial revolution, one-fifth of the population only had sufficient energy to beg." (Dora Costa, JEL, Dec 2013). Untold classroom hours spent teaching about markets seemingly  missed transmitting the big story.