Opinion: Free Market Minute

A Christmas Bedtime Story for Economists

Santa couldn't have done it with Vikings

The Christmas season is packed with all kinds of lessons. With that in mind, it is worth pointing out that Santa is no slouch when it comes to economics. Not because he can afford, or convince loved ones to afford, all those extravagant gifts that hopeful family members have placed on their Christmas lists. It’s his resource management skills that we really should admire. Santa, alone among whimsical holiday figures (so far as I know), has learned to apply the economic concept of Rudolph’s glowing red nose. From the perspective of business acumen, there is nothing more classically entrepreneurial than the realization that a former nuisance and a liability is really a valuable asset. Santa, an intuitive economist, spotted Rudolph’s comparative advantage as a team leader.

The notion of comparative advantage is often used to explain the economic motives for international trade, but it can also be used to explain why it is better to drive a sleigh full of toys through the fog with a glowing red nose than without one. Some individuals are simply better—relatively more efficient at certain tasks—than are others.

While the usual Rudolph lesson teaches kindness toward those who are different—or even freakish—it still treats the difference as a deficit rather than an asset. The possibility of a turning Rudolph into a special kind of fog light—that’s pure asset.

Fog-lamp reindeer, freakish or not, should specialize in leading the group in soupy weather. That is their comparative advantage. Likewise, individuals whose strongest talent is in singing should perform, in detailed number work should pursue accounting, and in athletics should play professional sports.

The reason: any alternative use of their time is a less valuable employment than the one in which they have a comparative advantage. So the fact that I am a good cook (let’s say) doesn’t mean I should quit my job as an economist. The market is pretty good at indicating where people best belong—even though Capital One’s career-changing Vikings surely test that assumption.

Having the right employee in the right job is essential to maximizing productivity. Still, red nosed reindeer are devilishly scarce. But even if there is Christmas volume that Santa can’t handle personally, whether it’s producing megapixels or providing a substitute for delivery by sleigh, market competition for supporting roles should keep everyone in wrapping paper come Christmas Eve.