As we noted earlier, Robin has a comparative advantage in hacking computers. Coincidentally, Batman has a comparative advantage over Robin in halting break-ins. If he were to give up hacking to turn detective, he would only have to give up half of a hacking job for each break-in he investigates. Robin gives up one hack for each investigation. Since one half is less than one, Batman has a comparative advantage in investigations.10 This isn’t determined by the market per se, rather it is an observation by the participants that leads to a more effective crime-fighting process; however, this can only happen if Batman gives up performing one of the actions. If he insists that he can do it all himself, thereby keeping Robin on the sideline, he will not only be eschewing the benefits of specialization, he’ll also get a sullen Robin. More to the point, comparative advantage works when each party produces only what they have a comparative advantage in. This means that to experience the value of teamwork, the players have to be willing to do what they do well, and only what they do well. If Batman tries to do some hacking on the side, this will lead to greater productivity on the hacking front but less on the investigative front, especially if Robin gets annoyed and tries to investigate a break-in or two himself.
This is a danger of having a young sidekick. They are often too impulsive. They don’t want to take instruction and consequently end up getting kidnapped, or worse.11 It is when the helper deviates from the plan that things go sideways. There is a method to the training, and usually that means the impetuous accomplice has to wait their turn. Stay in your lane and all will be right with the world. That may not make for a great story but it certainly makes more economic sense. All sidekicks at some point want to be the main attraction, but as readers know, this impulsiveness almost always leads to the sidekick being captured.
Trade You My Apple for Your Cookie
This brings us to the final point about comparative advantage. Once it is determined who has it and specialization occurs, how do you make the most out of it? This is obvious in the situation where Brazil is growing coffee and Germany is making cars. The citizens of each country are better off when they are able to buy both cars and coffee, but if each country specializes in the production of one good, they should produce none of the other good. This would seem to be a problem for consumers. In Brazil, they have lots of coffee, and maybe the excessive caffeine will provide enough nervous energy that people can just walk everywhere. Germans have beer, so why would they even want coffee? Well, consumers are weird that way. They like options, preferring to have multiple goods available. The problem is that if both countries try and produce coffee and cars, they are producing a good that involves a high opportunity cost. Consequently, while consumers may have both goods available to them, the price tag will be higher. What a quandary!
The recommendation of economists, therefore, is to specialize, then take some of what you are producing and simply trade it to the other country in exchange for what you want. Economists illustrate the value that results from trade with a tool they call a production possibilities curve. This line shows the combinations of output that a country or an individual can produce given certain constraints. What you are about to see may seem like a trick Zatanna would perform, but it is real. By utilizing comparative advantage, trading partners can produce a combined amount of goods that is within their production limits—as noted by the production possibilities curve—but by specializing and then trading what you do well for what someone else does well, it results in a consumption bundle—the combination of goods consumers can enjoy—that goes well beyond the production capabilities of either. This means more things for everyone!
To see how this works let’s examine the crime-fighting capabilities of Batman and Robin more closely still. Batman is ready to go to work and wants to get as many crimes solved as quickly as possible. As before, he can stop ten break-ins in a night or he can hack into five crime syndicates’ computer systems. However, he also has opportunities that lie between these extremes. Batman not only wants to stop the local crimes, he also wants to stop those naughty syndicates from bringing drugs into Gotham. Thus, he might mix up his crime-fighting activity. One of his other options would be to stop six break-ins and hack into two computer networks. So the Caped Crusader has options. Which one should he choose? Before answering that, let’s review Robin’s alternatives. He can stop four break-ins or he could hack into four networks. If he wants to do a little of both, one option would be to thwart three break-ins and worm his way into one computer system. The full range of options are shown in Tables 3.1a and 3.1b.
Table 3.1a. Batman’s Production Possibilities
Option Break-ins stopped Hacks
A 0 5
B 2 4
C 6 2
D 10 0
Table 3.1b. Robin’s Production Possibilities
Option Break-ins stopped Hacks
A 0 4
B 1 3
C 3 1
D 4 0
With these options, a couple of patterns emerge. First, Batman is better at both tasks than Robin. That should be no surprise, he is Batman after all. Also, he is the teacher. Robin is learning detective work at the feet of a legend. For Robin to be better than Batman would be like an elementary student showing up at a painting class led by Degas and outshining the master. That is not going to happen. It isn’t that he has no skill, it’s just that he’s, well, Robin. When someone is able to produce more of something than someone else, economists say that the production leader has an absolute advantage. When we discuss absolute advantages, how efficiently you produce things is irrelevant, as is whether you have a comparative advantage. This is a numbers game, pure and simple.
Absolute advantage doesn’t matter when it comes to having a sidekick. As we have seen, Robin’s role in the Batman universe is based on his comparative advantage. While Batman has an absolute advantage in both aspects of crime-fighting, he only has a comparative advantage in one and that is what matters. Batman can stop two break-ins for every hack while Robin can only stop one break-in for every hack. Again, as we determined previously, because Batman has to give up more crimes than Robin to engage in cyberwar against these firms, it is Batman, not the Boy Wonder, who should be out pounding the pavement in search of the baddies. Now, before we get to the punchline, let’s present a picture of this analysis.
Economists are fond of using graphs to illustrate what we are talking about. We often refer to these graphs as models. Like a model boat, car, or rocket, an economic model is a picture of reality simplified on a grand scale. If you were to put together a model of an aircraft carrier, it should be considerably smaller than the real thing. Other than size, the really noticeable difference is that it is missing the nuclear reactor that powers it. The model is made up of molded plastic parts that you fit together to represent the real thing, but no kit in the world is going to provide the plutonium to power it, let alone the radar, military hardware, or aircraft that are components of a real aircraft carrier.
Similarly, economic models are much simpler versions of reality. The world is too complicated a place to boil it down to a graph, or even a set of graphs. Due to its complexity, perfectly modeling the world would require the computing power of about 10,000 Googles. We don’t have the resources to buy that number of programmers or that number of gigawatts so we reduce the intricacy by making assumptions about our models. Essentially we shrug and say “hey, the world is complicated, and economics is complicated, and we’re not really smart enough to put all the pieces into the model, but if you take a look at what we have, it’s close enough to reality that you should trust our results.” Sometimes that combination of pleading ignorance and self-confidence provides reliable models, and by reliable I mean models that help us understand reality enough of the time that we start to have faith in them and teach them to others. A good economic model is going to show you the way in which some parts of the overall economy fit together to achieve a result, despite its imperfections.
The model of why Batma
n should keep hiring a Robin even when they grow up or are killed is the production possibilities model. It incorporates the concepts of comparative advantage and specialization to illustrate that if you do what you do best, the outcome is greater than the sum of the parts. Lo and behold, I give you the production possibilities of the Dynamic Duo in Figure 3.1.
Figure 3.1. Production Possibilities of Batman and Robin.
What is going on in these graphs? Let’s start with some ground rules. Since this is a model, we need to lay out our assumptions. In order to focus on how comparative advantage leads to a better outcome, we have to make sure that there aren’t too many outside influences impacting production decisions. Thus, we put constraints on our heroes. First, we have limited them to only two crime-fighting activities. There are no rescues of kidnapped hostages or saving children from burning school busses. Of course, we could lump those actions in with the break-ins stopped, but we want to keep things simple. Another approach would be to divide misdeeds into domestic and alien invasions. How the model is set up is the prerogative of the researcher, but if we are to rely upon the model it should be generalizable to multiple situations. The next assumption is that Batman and Robin are stuck with whatever resources they possess right now. This means they cannot enlist help from Batgirl, Batwoman, Red Hood, Ace the Bathound, or any other member of the Batman family. Neither can new gadgets be introduced into the fight. Whatever is in your utility belt at the beginning of the night is what you can use. This also applies to the current technology and computing power available in the Batcave, which would constrain the cyber warriors. In short, no new resources, no new tech, and importantly, no more time. This curve of production possibilities applies to a night’s worth of work.
Now some basics about the curves themselves. The downward-sloping lines of the production possibilities curve reflect that both Batman and Robin face scarcity. Starting from the point along the y-axis (the hacking axis), if you want to be able to fight more crime, you have to give up your time in the Batcave and hit the hard streets of Gotham. For Batman, he can hack into five firms when he isn’t searching for criminals, but if he wants to solve even one of the mysterious break-ins he has to cut back on hacking. To stop two crimes, he would move down and to the right along the curve from a combination of (0,5) to the combination of (2,4), which corresponds to two break-ins stopped and four hacks. Thus, to stop crime on the street he has to sacrifice hacking. He cannot have more of both activities. This is the notion of opportunity cost at play. Batman is giving up one thing to get something else. His next best option for fighting the crime syndicates is to stop the small-time criminals on the street. For Robin, the production possibility curve is downward sloping because, although he can’t do either task as well as Batman, he still faces scarcity. To stop crime, he has to give up some hacking as well. To stop just one break-in, going from zero to one along the x-axis (the break-in axis), he has to move down the y-axis (the hacking axis) from four hacks to three. This moves him along his curve from (0,4) to (1,3). So, point number one: Because we live in a world of scarcity, to produce more of one thing, we have to produce less of something else.
Production is limited by the production possibilities curve. Think of it as a boundary beyond which it is impossible to produce more because, as we have already noted, you are not able to increase your resources or your technology. However, it is possible to produce some combination within the boundary. Batman might decide to order pizza and while he waits, time ticks away, preventing him from getting to the scoundrels on the street. Similarly, Robin starts rocking out to some tunes he downloaded onto the Bat-phone and loses focus on his hacking activity. As a result, there is the very real possibility that the Caped Crusaders do not produce up to their potential. Thus, point number two is that while you are limited by how much you can produce, you can easily produce less than your potential. Such action would probably lead to some angst-filled regret monologue where the heroes lament not doing more. What they are saying is that they were producing inside their production possibility curve.
Prepared with the background and the basics, and knowing that Batman has the comparative advantage in pursuing criminals and Robin, while not as productive as Batman, has the comparative advantage on the computer infiltration side, we can now use the model to show the magical benefits of comparative advantage for crime-fighting.
Holy Comparative Advantage Batman!
We’ve noted that Batman and Robin should specialize in production. Now for the coup de grâce. By specializing, even though they cannot produce beyond the production possibilities curves, they can actually consume beyond those curves. To see this, take a look at the two tables below. In Table 3.2, we have a situation where both heroes engage in a little bit of street level crime-fighting and some digital skulking. In other words, there is no specialization.
Table 3.2. Heroes Do Not Specialize
Batman Robin Total
6 break-ins stopped 3 break-ins 9 break-ins
2 hacks 1 hacks 3 hacks
The choice of activities for both heroes places them along their production possibilities curves. By summing the amount of each undertaking, we end up with nine crimes stopped and three hacks completed in total. That’s a pretty good night’s work. But they could do better. Table 3.3 shows the amount of criminal activity that is stopped when each hero performs the task for which they have a comparative advantage.
Table 3.3. Heroes Specializing
Batman Robin Total
10 break-ins 0 break-ins 10 break-ins
0 hacks 4 hacks 4 hacks
By specializing, the Dynamic Duo has increased the hacks by one and the number of crimes stopped by one. They can “consume” ten investigations and four hacks. So, how does this compare with the total production of the Caped Crusaders? Figure 3.2 shows the combined production of Batman and Robin, found by summing the two production possibilities curves. There is still a barrier beyond which the two cannot produce, but notice one very, very important detail: If Batman and Robin team up and each specializes in production, the amount of activity they can generate puts them at the white dot in the graph above. That dot is beyond the production possibilities curve! What strange witchery is this? Has the Enchantress befuddled our heroes?12 No! It is the power of specialization at work!
Figure 3.2. Combined Production of Batman and Robin.
When Batman and Robin each specialize and provide those skills in the context of a team, the result is that more crimes are thwarted than if they had worked individually. This is why Batman keeps Robin around. Sure, he’s a bit of a pain sometimes. His zany cracks in the 1960s television series (including Holy Hamlet, Holy alter ego, Holy haberdashery, Holy ravioli and many, many more13), his propensity for over-stating his abilities, his later moodiness, and inclination to try and prove his worth, which leads to Batman having to bail him out of diabolical situations, are all worth putting up with because they accomplish greater things as a team.
There is one final component to teaming up. It isn’t enough just to perform the task for which you have a comparative advantage. Batman could investigate break-ins and Robin could hack networks till the cows come home, but on their own they find that their crime-fighting efforts lack something. Robin never finds out what the word is on the street and Batman remains perpetually in the dark about the corporations’ inner workings. In order to make sure that they get the most out of specialization, each character does what they do best and, in effect, trades that skill to the other. Such gains from trade can be found any time economic actors specialize, and this is the real reason why people engage in trade. You want something someone else has. Rather than beat them and take what you want, civilized societies have developed plans to trade. When trades are entered into voluntarily, both sides are made better off. Specialization makes those trades more profitable because even though you don’t have more inputs to produce, both parties can consume more than they could on their own.
And the Answer Is …
This chapter has covered a lot of fundamental economic topics but they have all revolved around the idea of teaming up to get more accomplished. While our focus has been on heroes, these ideas apply to all production. Countries specialize in certain things because they can do them better and at a lower cost than other countries. Textiles come from southeast Asia, technology from the United States, Japan and South Korea, metals are mined in South America and Australia, oil comes from the Middle East. Sometimes countries have natural resources that allow them to produce in a lower cost fashion. Other times countries develop specialties over decades. Companies take advantage of the same processes. You call a law firm for legal help and head to the grocer to get food for dinner. Businesses do not provide one-stop shopping for all your needs. They specialize in production because by doing so they can become incredibly competent in a specific area, thereby reducing the costs of production and passing those savings onto consumers. We as individuals do this as well. We call the plumber instead of trying to fix a leaky pipe, or we head to the doctor rather than trying to diagnose our own ailments. Why? Because it is too costly for us to become experts in everything. We rely on others’ specialized skills to make our lives better.
Why Superman Doesn't Take Over the World Page 8
