I think it was probably the sheep on the cover of the book that caught Jim’s eye. When he saw my copy of Bryan Caplan’s book, “The Myth of the Rational Voter”, Jim picked it up and asked me what it was about.
I explained that Bryan Caplan considers that voters tend to have irrational views when it comes to issues like free trade. He argues that this irrationality is a predictable response to the incentives associated with voting. Since there is a miniscule probability that the vote of any individual will be decisive in changing the result of an election, people can vote according to their feelings about how the world works – however wrong those feelings might be – safe in the knowledge that their individual vote is not likely to determine the outcome. Caplan reckons that when people vote they don’t weigh up the options the way they do when they make decisions that they expect to affect outcomes. They talk about their voting options as if they were ordering dinner from a menu, but their actions suggest that they expect to be served the same meal no matter what they “order”.
Jim did not seem overly impressed with Caplan’s views. He said: “That is what I would expect from a typical economist. You blame voters for being irrational about issues like trade protectionism, but most of you do a lousy job of explaining the benefits of trade.'
So I asked Jim how he would explain the benefits of trade. Without even pausing to think, he said: “Well, I would tell them what my father told me. Dad was a successful wheat-sheep farmer, but he was also a really good mechanic and a great gardener as well. One day, when I was still a kid, I asked him why he paid the local garage to service the family car when he could do it himself and why he didn’t grow all the vegetables we needed at home. I mentioned that Jack Smith up the road serviced his car, grew his own vegetables, milked a cow and kept chooks. Dad asked me whether I thought the Smiths were prosperous and successful farmers. I had to admit that I thought they always seemed to be struggling to get by. Dad explained that when you try to be self-sufficient and spend a lot of your time doing things like servicing your car, gardening, milking cows and feeding chooks instead of focusing on your strengths, you inevitably end up just eking out a subsistence living.
The same is true for the whole country. We are better off if we specialize in producing the things we can produce at relatively low cost and trading with the rest of the world to get the things that are costly to produce domestically.”
I was quite impressed by Jim’s explanation. I suppose that is why I forgot that he wasn’t an economist. I said: “A lot of people seem to have a good intuitive grasp of opportunity cost and the benefits of specialization from their own personal experience. It shouldn’t be too hard to get them to understand the benefits of free trade.”
“What is opportunity cost?” Jim asked. But before I could explain, he said: “Don’t bother trying to explain. I’ve got better things to do with my time that to listen to you trying to explain esoteric economic concepts. You economists should learn to talk the same language as the rest of us.”
After I had written this I was wondering where Jim had picked up his views about the benefits of international trade. It is easy enough to grasp of the advantages of specialization in running a business, but it is not intuitively obvious that this reasoning is relevant at an economy-wide level. When I rang him to inquire, Jim told me that he had learnt all he knew about economics from Bert Kelly. He said: “Bert Kelly was a great economist because he knew how to explain things so that they made sense.”
I didn’t bother telling Jim that C. R. (Bert) Kelly did not have any formal economics training. Bert was a politician and newspaper columnist who made a huge contribution to economic reform in Australia by explaining economic issues in a way that could readily be understood by people without formal training in economics. Bert died in 1997 and is still sadly missed.