In the Hicks household, this will long be remembered as the “summer of silly bands.” If you have not heard of these wondrous items, you must count yourself as culturally uninformed and wholly ignorant of the prime conversation starter at swimming pools, soccer camps and other summertime venues.
Because at least one gentle reader is likely unacquainted with silly bands, I shall fulfill a duty of explaining these rubber marvels and their economic significance.
Silly bands are thin rubber bracelets that come in delightful shapes, including hearts, donkeys, cars, violins and tanks (the latter is a personal favorite).
These items sell at convenience stores—oftentimes very quickly according to the folks at the cash registers. It is important to note that children trade silly bands. The goal, according to those urchins I have queried, is to have an extreme variety in colors and shapes. The rarity of silly bands is important, and, as I understand it, a glow-in-the-dark kelly-green monkey vies with the gray U-boat or orange flamingo for scarcity, and therefore value.
There are economic lessons here. The most important is that the value of things is necessarily determined by what is known in econo-jargon as utility. The notion of utility tells us that it is the desire for and scarcity of an item that generate its value in a market exchange. Now, this is very deep philosophical stuff, since it clearly implies that in our worldly realm, it is humans alone that set the value of things.
Thus, there are no truly intrinsic values to nature, life and the like. This idea of value is also a deeply egalitarian, intellectually rigorous and honest approach to the world. This notion is easily misunderstood, for the absence of an intrinsic value for something does not mean it is less valuable—only that it is human preferences, not dogma, that make that judgment.
It manifests itself elegantly. Here’s an example:
Suppose we thought that our natural surroundings had an intrinsic value. Then, any one acre of land would be just as valuable as another. Yet, the 843 acres of Central Park in New York are hugely valuable, even though they are not for sale. That’s not because it sits near other high-priced real estate, but because green space is scarce in New York and well-liked by New Yorkers.
This value metric is also consistent with the deepest beliefs. For example, human life has value, but in our eyes is not equally valuable. We all know this and act routinely this way. By way of illustration, by my reckoning, wearers of silly bands are more valuable than business columnists.
Economists exploit these truths to estimate the relative value of cleaning air or water, or building more green spaces. This is a critical notion for informing public policy about investments in the environment and other things that cannot be as easily traded, or valued, as silly bands.•
Hicks is director of the Center for Business and Economic Research at Ball State University. His column appears weekly. He can be reached at email@example.com.