Saturday, September 8, 2007

turning a paper clip into a house-- and now, a book

Kyle MacDonald's story-- how he repeatedly bartered in 2005, starting with a red paper clip and finishing with a house-- is a new "staple" in Economics classrooms everywhere.

His escapades are a great way to illustrate the powerful concept of "voluntary, mutually-beneficial trade". VMB trade is at the heart of market activity. Although there are (important) exceptions to the rule-- coercion, fraud, and "irrationality"-- the norm in free economies is that people freely engage in activity where they expect that the benefits will outweigh the costs.

I first read about MacDonald in newspaper stories. Now, he has a 300-page book (One Red Paperclip) on the events that have made him relatively famous--a review of which I saw in a recent issue of the WSJ. He also has a movie deal with DreamWorks-- although I'm hard-pressed to imagine how that could possibly be successful. I know that economists would flock to theaters, but they'd need a broader audience than that!


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