December 3, 2012

Missing from Ayn Rand's Economics

For a guy who started with Rand and then went on to economists, I was pretty impressed on my return trip with her grasp of free market economics. Atlas Shrugged is built on respect for property rights and capitalism, but her love for hard money and her understanding of spontaneous order seem deft in the middle of "a philosophy book." The invisible hand is well represented as is the nature of economic actors as both producers and consumers.

But it struck me this morning that she is missing Ricardo's comparative advantage, and that this omission leads to the suspicions of the heroic ideal nature of the characters. Eddie Willers is important to Taggart Transcontinental and Ms. Ives at Rearden Steel. I don't know if they are purposefully undervalued or merely overlooked, but it is never recognized that Hank should not be picking up his own dry cleaning.

Maybe Midas Mulligan grows a fine tomato and John Galt can swap out a faucet washer as quick as you please -- but recognizing a truly modern economy requires not only the benefit of trade but also of organization and comparative advantage. A is A, but Apple requires a Steve Jobs and a battery engineer and a type designer and some folks to keep the trash baskets emptied.

Maybe it's a small thing, but it is a miss. Left Eddie on the flippin' train, she did...

Philosophy Posted by John Kranz at December 3, 2012 12:20 PM

It is a small thing, and it is in there - at least in the case of Eddie Willers. I vaguely recall the discussion that he was the confident industrialist in his own sphere of expertise. I'll take it as a homework assignment to find the passage and elaborate on the lesson in it.

And if I'm wrong - if you've found a error (or even an omission) in Rand's philosophical worldview - it will be the first example ever presented to me in my ten-plus years of being her student.

Posted by: johngalt at December 3, 2012 3:43 PM

Well, that, and it's total trash and she is selfish and hates people and wants to see us eat our own children...

Willers gets some kind comments (but still gets left on the dang train at the end). Not sure Ives does. I would not call it an error. Somewhere between omission and underappreciated, there are competent people who are not Hank Rearden but contribute mightily to production.

The applause for the great ones' skill at manual labor is contradicted by comparative advantage: yes, the great cancer researcher probably does do a better job mowing his yard than the neighbor kid. But we are all better off if he slides Buster Jr. a twenty and heads off to work. I don't think you'll find a good example of that in Atlas.

Posted by: jk at December 3, 2012 4:01 PM

It seems to me that Rand does give credit to various TT workingmen (Bill Brent, the engineers) and to the importance of making a superb hamburger (though it turns out the chef is the world's leading philosopher...) but I think Eddie's last scene is supposed to be symbolic. Without a Dagny or Galt to lead, a Willers could only get the trains part way across the country.

There is also the bit about the Rearden Steel union and its workers, put in a positive light.

Posted by: Ellis Wyatt at December 3, 2012 6:47 PM

Didn't do my homework last night but wanted to respond to your comparative advantage critique from my own perspective as a reader.

Comparative advantage is a fine principle in a free market, but it is a principle of optimization. A free market can function just fine without it. One of the main themes of Atlas, however, is that men of the mind would prefer to withhold the product of their genius than to have an ever growing share of it confiscated by "society" through the democratic authority of its government. In the startup phase of their isolated free market in Galt's Gulch there are not enough people to excel at every skill, so highly specialized people face the prospect of doing for themselves or going without. They choose to do for themselves.

There's a secondary point being made here: While laborers need men of the mind in order to survive or at least to prosper, men of the mind can do just fine without laborers. Labor is universal; genius is not.

Posted by: johngalt at December 4, 2012 2:39 PM

Remember we are talking about a novel, not a philosophical treatise.Labor is universal; genius is not; is a general principle but it doesn't necessarily apply to every individual case. No one human being can do everything, nor should he.

Posted by: Steve D at December 4, 2012 4:07 PM

@SteveD: I wonder, have you've read jk's Review Corner of last Sunday? I believe a major conclusion he reached was that Atlas Shrugged is both a novel and a philosophical treatise.

But you have, I think, caught me out in an error. Labor is no more universal than genius. From my earliest memories comes a license plate in my grandfather's workshop: "Fight Poverty: WORK!" Conversely, for any man willing to embrace his rational faculty, genius is no lofty, unattainable ideal. This was, after all, Rand's very point!

Thank you, most sincerely.

Posted by: johngalt at December 4, 2012 4:50 PM | What do you think? [6]