Play Store Economics; D. Russell

PLAY STORE ECONOMICS THE "father of the Tennessee Valley Authority," Sena tor George Norris, once said: "A proposal from a great association of Tennessee says, in effect, 'Let TVA prop erty be subject to taxation the same as everybody else's property.' ... If we go to that extreme, Senators can see that the TVA would be out of business in three months." Senator Norris was wrong. There is no more reason why the Tennessee Valley Authority should go broke with its annual real loss than there is that the United States Post Office must go out of business with its stag gering yearly deficit. There is no necessary relationship in either instance between their production costs and their selling prices. In fact, there can't be any such rela tionship; for as we shall see, government planners have no possible way of ever knowing the complete costs of their projects. Since they can't calculate their full real costs, obviously they can't set asking prices that are eco nomically realistic. And since they can't set realistic prices, the resulting allocation of scarce resources is neces sarily inefficient.

I had read about this basic economic problem of "so cialist calculation" in my college textbooks, but I never 218 PLA Y STORE ECONOMICS 219 fully understood the arbitrary and unrealistic nature of nonmarket pricing and allocation of resources until I began "playing store" with my five-year-old son. We started our game by making a generous supply of price tags to correspond with the "play money" he already owned. Then he was given a roll of scotch tape and asked to put prices on all his merchandise, or scarce resources. And like any other manager who doesn't have to worry about costs and prices that are set by competition in a market economy, my son's price selections were remark able. In his enthusiasm for our game, the youngster had appropriated his mother's jewelry box and priced all the items in it, along with his own toys. I quickly bought back her engagement ring for thirty cents. He was some what disappointed when I refused to buy a fascinating charm bracelet at $300. And he was completely heart broken when I passed up his favorite cloth dog at $500.