Emma Tyler, Chapter 6, Question #6

Chapter 6 of Naked Economics had a focus on the importance of investing in human capital, and with this topic came the question of the whether or not economic development is a "zero-sum game". The answer is no. There is no need to have poor people in order to have rich people. Economic development is all about increasing the size of the pie rather than just re-slicing it (the pie metaphor was used quite often in this chapter). One of the most interesting sections I found in this chapter was regarding the slicing of the pie. I found the excerpt about the survey that was done by Robert Frank (Cornell economist) to be especially intriguing. In the survey, respondents had to choose between two worlds. World A where you make "$110,000 and everyone else earns $200,00;" or world B "where you earn $100,000 and everyone else earns $85,000." (144) I was out to dinner with my parents tonight, for their 18th wedding anniversary, and while we were on the topic of my classes, we began to have some discussions about economics. I presented them with both of the options the survey just mentioned gave and they both chose World B. The book later goes on to explain that either the respondent wants a world where they are all together richer (in one world they make $110,000 and in the other they earn $10,000 less) or where they are richer than the majority of the others in the community; however when I asked my parents why they chose World B, they both said because it was more equal than World A where there was a $90,000 difference between employees whereas in World B there was only a $15,000 difference. Now, it may be because my dad was an economics major in college, and my mom was a politician (who, of course, had to deal with economic issues quite often, and understand them), but I think the majority of people are really just worried about having a more equal slice of pie than everyone else. At the end of the chapter, Wheelan mentions that if a country were to find a way to better "mobilize and apply" their human capital, they would "be the big winners of our age." (147) In that situation, less people would be impoverished (more equal pie slices) and a richer economy in general would be the outcome.