The true worth of things

Paul Krugman has a longer piece in the New York Times magazine on the challenges of “Building a Green Economy.” As a warm-up, he dispenses some Econ 101 axioms, like this one: “If there’s a single central insight in economics, it’s this: There are mutual gains from transactions between consenting adults. If the going price of widgets is $10 and I buy a widget, it must be because that widget is worth more than $10 to me. If you sell a widget at that price, it must be because it costs you less than $10 to make it. So buying and selling in the widget market works to the benefit of both buyers and sellers.” A few hours after I read this a saw a leatheresque jacket in a shop window worth around $700. Applying Krugman’s analysis, it’s easy to see why someone would sell the item at this price: it probably cost them $30 to – I was going to say “produce,” but we all know clothing companies don’t produce anything these days. The other half of Krugman’s observation made me scratch my head as I tried to imagine the kind of person to whom such garb would be “worth” the GDP per capita of Niger. My next thought was about a dose of cocaine – but let’s focus on the legal economy. I have only one explanation as to why Krugman can still use the term “efficiency” with – I assume – a straight face: he hasn’t watched Food, Inc. On second thought, putting hefty price tags on a few flashy items can probably help address one of the chief complaints John the Savage once made about “civilization”: “Nothing costs enough here.”