Opportunity costs (An economical-science-fiction parable)

Source: http://www.ufocasebook.com/bestufopictures10.html

The following piece was written by a friend of ours, Doreen Bekker. Being a senior lecturer in Economics at the Department of Economics and Economic History at Rhodes University, her take on our mainstream  economic system is very interesting and real food for thought. She is such a good story teller and that, along with her story's message makes her piece something we're proud to post on The Restory News. 

Introduction

Perhaps upon a time soon, aliens from another planet may decide to visit us here on Earth. And maybe[1] the reason for this visit is their desire to encourage inter-planetary trade[2].

Why would any alien species, who are capable of interplanetary travel, want to trade with Earthlings though? Well, maybe there is something that planet Earth has that they need. In other words, we may have a comparative advantage in the supply of a product or service that they may require! After all, according to our economic system this is important.

Or maybe it has already happened? Let us assume that it has! So we could restart our tale in the traditional way, at the once-upon-a-time moment when these aliens first made contact with Earth.

Initial contact

As a more advanced civilization than us, the aliens knew that the acceptable procedure would be to make contact with our leader. And so they did. Of course, initially most of us knew nothing about what was happening. Our leader kept it very quiet for fear of creating panic amongst the masses.

The first contact was an incredulous moment for Jack. Never in his wildest dreams did he think he would experience this. Or rather to be perfectly honest, he never really believed that there were aliens anywhere in the universe, in spite of all the money that was being spent on trying to reach the next solar system. And as President of the International Governing and Advisory Forum (IGAF), he was the de facto leader of the planet, so he would know how much money was being spent by the International Fund for the Exploration of Outer Space (IFEOS).

He was sitting on his verandah that evening sipping his obligatory martini, looking at the night sky in the hope of seeing some stars for a change. It was a clear evening sky, no clouds were visible. Of course only those who had been born more than 50 years ago really remembered what a clear sky looked like. Jack could remember seeing many stars in the sky when he was a small boy - but no more. Even scientists who went to the north and south pole to explore for fossils of animals that used to live on what are no longer continents of ice, said even there it was a rare occurrence to actually have a sky clear enough to see stars with the naked eye.

At first, his experience was the typical sci-fi-movie moment - a bright light in the sky getting bigger and bigger, close and closer. At first he thought it was his private presidential solar-powered transporter, but then he realized it wasn’t making the right sound, or rather there was no sound at all. “Strange,” he thought.

Then he saw it. What was this vehicle? Whose was this vehicle? And how was this vehicle able to enter his protected, private airspace? And coming to think of it, how was it able to get this far without setting off the protection system? And where were his bodyguards? Jack was slowly but surely becoming more and more angry. Someone was going to have to answer a number of questions!

An opening appeared in the side of the vehicle and some people appeared in silhouette. Jack couldn’t see them clearly because the lights of the vehicle were still too bright. He was starting to feel a bit anxious. Were these assassins sent to dispatch him to the afterlife that he did not believe in? Where were his bodyguards, where was his panic button, oh yes one on each ring finger. He pressed the rings with his thumbs sending the alert message to his bodyguards who would be here in a matter of seconds.

The people came closer and closer. Where were his bodyguards?

Then his jaw dropped. His martini glass crashed unnoticed onto the verandah floor. Who, what were these? He must be dreaming. “Please, let me be dreaming,” thought Jack, “I’ve been watching too may sci-fi movies.”

Three strange-looking beings (almost human but not quite) stopped in front of him. “Greetings Mr President of IGAF. We are official trade representatives from Tchoclug[3] in the Hjilitad[4]  solar system. We are here to begin trade negotiations with your planet. We have been monitoring and observing your planet and its occupants for some time now and we have come to the conclusion that there is a very real possibility that we can both benefit from inter-planetary trade.”

Struck dumb was an understatement. Jack tried to get his mind around this but he kept on thinking that he must be hallucinating. However, the three aliens were very patient with him. They understood that such an encounter must be a shock for any Earthling.

After what felt like an age, Jack muttered “Can this really be happening?” and then “Where are my bodyguards?” One of the aliens replied “we have put a shield around you and your property so no signals or people can get in or out. I am sorry, but most aliens react quite aggressively the first time they meet us so we have to take precautions. We promise that nothing will happen to you, we just want to talk, negotiate.”

“Oh,” squeaked Jack. And immediately, always the politician, he cleared his throat and thought “thank goodness that was not live!” Exactly what do you want to talk about, er … hm … do you perhaps have names?” he asked.

“You can call us Adam, John and Milton,” said the alien who seemed to be the spokesperson, pointing firstly to himself and then to the other two. “I think these will be easier names than our real ones.” Jack could have sworn that the alien smiled.

“What we want to talk about is the possibility of trade between your planet and ours. It could be worth a lot of money to your planet,” said the alien, who Jack now thought of as Adam. Jack briefly closed his eyes and thought, “if I keep them closed then this could just be another trade negotiation.”

“Exactly what is it that you want to trade with us?” asked Jack, “I can’t imagine what it is that we could have that you need.” “We are in need of brain matter” said Adam. “I beg you pardon!” said Jack. “Let me explain,” said Adam.

“During our observation of your planet we realized how similar in many respects we are as people.” “People?” thought Jack, then realized how prejudiced he sounded! The alien carried on to explain that on their planet, society was run along very similar lines as on Earth. People traded their goods and services with each other without interference and everyone was allowed to keep their earning for themselves. Jack began to understand that what the alien was saying is that their economy was also based on a market system.

“So because our societies think and operate in a very similar way, it means that on a certain level we are very compatible,” said Adam. “Of course, we are a lot more advanced scientifically and technologically, but in essence the moral and ethical bases of our societies are very similar.”

“I think I understand that” said Jack, “but I still don’t understand what you mean by needing brain matter! If you are so much more advanced than us how can we help you with knowledge?”

“No, no it is not knowledge we need,” said Adam. “Because we are so advanced we have been able to cure all diseases so our people live for a very long time. But what we have not been able to stop is the slow deterioration of people’s brains. By the time people are at what you might call mid-life, their brain-matter needs to be supplemented. What we need is a source of brain matter from a planet similar to us that has a large and continuously replenished supply of this product. Unlike on our planet, brain matter is a renewable resource on Earth. As far as we could establish it is one of the few products that you have a comparative advantage in that you have not thought to make a profit from. So we are here to negotiate to harvest and buy brain-matter from your planet. You have a large renewable supply and we have the demand - a perfect market solution.”

Once again, Jack was dumbstruck. For a politician this means he was completely and utterly floored. It seemed as though the aliens thought this meant he was not convinced about the possible benefits to Earth because Adam quickly reassured Jack that they were happy to agree on a lucrative price.

Jack’s mind felt like a tornado had ripped through it.  The words, renewable resource, supply and demand, large profits, swirled in his brain. He briefly considered what “harvesting brain matter” might entail but pushed that thought aside. As the aliens rightly pointed out, there are one-hellava-lot of people on this planet! “Renewable resource is one way of putting it,” Jack thought wryly. “One of the things we humans have not changed is our ability to procreate.”

“I do hope you understand,” said Jack stalling for time, “ a decision of this magnitude cannot be taken by only one person. I will need to consult with my board.” “Of course,” said Adam, “we would have done the exactly same thing if our positions were reversed. How much time do you think you need? An Earth week, or two?”

By this time Jack’s mind was starting to function more normally. He started to appreciate the upside of this bizarre offer. One of earth’s biggest problems is overpopulation. Here was a possible solution, a purely logical solution which could be rationalized according to solid economic theory and which in addition could be profitable for the planet. “How’s that for a possible win-win situation?” he thought. Still, he was a bit hesitant, what did they actually mean by “harvesting brain matter”? Was it what he thought? On the other hand, here was a possible golden opportunity which he didn’t want to let slip through his fingers.

“Would you give me about two weeks?” he asked. “No problem,” said Adam “We will park in space and return after two weeks.” “Before you go I do need some specifics though” said Jack.

Before Jack could say any more the alien spoke again. “We will pay you in what you call gold or platinum, whichever you prefer, and will pay on consignment, or what you call cash-on-delivery.” “Exactly what must we deliver to you?” asked Jack, “I don’t think we have the necessary medical technology … er … .”  “Oh no, we will do all the necessary procedure when we get back to our planet. We prefer to take live cargo, that way the product does not deteriorate. Unfortunately brain matter does not have a long shelf life.”

“Er, and would you be requiring more than one consignment? I mean, if you come back for a second batch would you be returning the er, specimens once you have extracted the necessary er, renewable resource from er, its er, host?” “Oh dear, I am sorry if I did not make myself very clear. Our technology is not that advanced yet - unfortunately. We only keep the host alive until we require the brain matter, then we recycle whatever is left. Maybe we were mistaken, but we assumed that you would not need the hosts back as you are so adept at creating new ones.”

Jack swallowed. “ Ah yes, I mean no, I-I understand, and as you quite rightly point out, we have a lot of this renewable resource on Earth. Obviously we cannot overharvest though. What sort of volumes were you thinking of and of course, I would need to have some exact figures, how much would you be prepared to pay for er, one host, as there would be some costs involved on our side.”

“We have the authority to offer you one ton of gold or platinum per host. We require 5 million hosts over a period of a year. But as far as your costs are concerned, these should be minimal. Once you and your board have decided from where we can collect our consignment of hosts and how many, we will do the actual collection ourselves. With all due respect, I think your methods may be a bit more primitive than ours.”

“Of course,” said Jack, starting to feel a little nauseous. “I think I have all the information I need to take this proposal to my board. I do hope you understand that there may be a few more questions that could be raised, as we have never dealt with something of this nature before.”

“
Oh” said Adam, sounding a little surprised. “Of course, but then maybe we should come back in a week’s time, to check what other information you may need to come to a decision.”

“Yes,” said Jack, “yes.” By now he wanted the aliens to go away so he could think without them watching him so intently. He didn’t want to loose this opportunity, but he wasn’t sure how the other members of the board would react to the suggested trade. He needed to think about the pros and cons, get a cost-benefit analysis, yes that what he should do –arrange a cost-benefit analysis! That would help get emotions out of the way. After all, his responsibility was to the long-term survival of the human race, and some individuals were always being sacrificed along the way. That was the nature of the system.

There are many poverty-stricken, unemployed people all over the planet. If the aliens went to a town that was far away from other places, no-one would know what had happened to the people except that they had disappeared. And the return - think what he could do with so much gold, there were so many projects that had been put on ice because of cutting fiscal budgets. “And I think I would be entitled to a small commission seeing that I am the official agent.” This idea was starting to sound like it had more benefits than costs. “Yes” thought Jack, “we must look at this rationally. After all, we live in a market driven society, it is about supply and demand. We buy and sell all other living matter, how is this any different?”

Nevertheless, there was a slight uneasiness that would not leave Jack. “Jack,” he said to himself, “remember, be rational, this is about cost versus benefit, what will be the best for our society in the long run? And in any case I will not be the one making the decision.”

“Well Mr president … ” said Adam. Jack started. “Good grief they are still here!” he thought. “Yes” said Jack. “We will be on our way then.” Said Adam, “Here is a draft contract that you can look at in the meantime. We will be back next week, same time.” “Yes, yes of course.” said Jack, “I will make sure that I have all the necessary queries lined up by then.”

He watched as the three aliens moved back to their vehicle. “I guess it’s a space ship” thought Jack “or am I dreaming?” Just then Adam turned around, “just wait there Mr President, I want to bring you something as a small token.” The three aliens disappeared into the ship and after a few minutes Adam came out again, carrying something. As he got closer, Jack saw it was a bar of gold, alien gold.

The big decision

Jack walked into the meeting feeling rather tense. He pushed a trolley covered with a thick blanket before him – an unusual sight on any day! The members of the board were all present as ordered.

After making sure that only the board members were present, Jack cleared his throat out of habit to get everyone’s attention. “I have an unusual proposition to discuss with you.” he said.  “That is what your e-mail said, Mr President.” pointed out Jack’s least-favourite member of the board. Jack ignored the slight. He knew everyone present would be very quiet, very soon.

“That was the basic proposition from the aliens,” he said, after repeating what Adam had told him. “Now, before I give you some more detail ... ” The members of the board were looking at him as if he had gone mad. Exactly the response he had expected. “… here is a token of the aliens’ good will. Please come closer to have a look.” Jack dramatically whipped the blanket off the trolley. A bar of gold lay glimmering in the lights of the enclosed room. A bar of gold - something they were all used to seeing, - yet this gold seemed different. The more they looked the more they realized it was not gold that had come from Earth.

Now that Jack had everyone’s not only undivided and but also no-longer-skeptical attention, he carried on. “According to their draft contract, the aliens would like to take their first consignment of 500 000 hosts with them as soon as possible – in fact as soon as a collection craft can arrive to do the necessary transfer. Thereafter they will collect another consignment of 500 000 hosts every month, until they have the full quota of 5 million. They will be paying cash on delivery for each consignment. However, they will pay an initial 10% deposit up front for each consignment. The first deposit will be paid before the negotiators leave next week. I think let us now break for lunch, so we can discuss this more informally.”

Jack had decided to put the basic principle to a vote as quickly as possible so after lunch he asked the members of the board to vote yes or no to the proposed trade deal. “Once we have made a decision one way or the other, then we can iron out the details,” he said. Jack had of course already anticipated the majority would be in favor of the lucrative if somewhat unorthodox trade deal. He was surprised though when he received a 100% yeses. It took much longer to reach agreement about the detail though.

The contract

The main obstacle seemed to be that very few of the members of his board trusted the aliens. “How do we know that we will be paid once they have a consignment on board? They could just disappear.” pointed out one member.  “We should make sure we get payment before they take delivery, in fact even before they are given the co-ordinates of where they can upload their consignment. We don’t know how quickly they can travel to the place and upload! Let’s be realistic, we have no way of putting debt collectors after them do we!” “We do have to be reasonable though” said Jack, “they will also surely want some guarantee that we won’t back out of the agreement once we have been paid.”

Another problem related to trust was “how do we know that they will ever come back for further consignments once they have taken the first one?” By now each board member was thinking in terms of their own possible commission and had been doing sums. No matter how one looked at it, a tiny percentage of 5 000 000 was infinitely more than the same percentage of 500 000! As one member of the board suggested, “If we are treating this proposed trade policy as an efficient and profitable solution to the planet’s overpopulation problem, then we need to ensure that it is carried out properly.”

After much haggling and posturing amongst the members, Jack’s least-favorite member of the board succinctly summed up the board’s major concerns. “We have no way of knowing that the other party will perform according to the contract, nor do we have any way in which to enforce the contract in the event of them defaulting,” said the member, “the way I see it, it would serve our best interests most, if the aliens were to pay the full 5 mil tons of gold or platinum up front. Given their superior technology I suspect it would be very difficult for us to avoid keeping our side of the bargain!” The latter point was stated with much cynicism. “In addition, the interest earned on the capital would be a tidy sum.” The last point swayed the last few doubting members. “This is the only time I have agreed with this person” thought Jack in mild amusement. After much discussion and many suggestions the board made some amendments to the contract and left the final haggling to Jack.

Jack awaited the aliens return to discuss the revised contract. He was surprised to say the least when Adam accepted their amendments without any objections. All Adam said was “we would obviously have to insert a clause to cover our own interests.” “Naturally” said Adam.  “We will be back in two weeks,” said Adam, “with the payment and to collect our first consignment. In the meantime we will pay you the 10% deposit on the first consignment which you may keep even if we are not able to come to an agreement.” Jack, ever the sceptic, wondered if they would ever see the aliens again.

The aliens returned within two weeks. The contract was handed over to Jack. As far as he could see it was exactly as had been suggested by the board. He speedily circulated it to the members of the board to check and everyone was happy that the aliens had agreed to the full payment immediately. The only change made by the aliens was as expected – that the earthlings agreed “… not to prevent the transfer of the agreed upon 5 million earthlings to the alien spaceships within the stipulated time period of one earth year… ”. “As if we could” thought Jack wryly.

The first consignment

“Now comes the tough part” thought Jack, “deciding from where the aliens can take their first consignment.” 

However it was a lot easier that he thought. The members of the board quickly made a number of suggestions. There were more people living in abject poverty than Jack realized! “I think as many consignments as possible should be taken from areas that are not too near any metropolis,” suggested one member of the board. “We don’t want people to start panicking.”  “You mean we don’t want the masses to find out what is happening!” thought jack to himself. He decided it was not wise to utter this thought out loud though.

The first few consignment spots were therefore quickly decided on, with enough possible areas to make up the rest of the 5 million hosts. Jack could not help feeling a bit revolted by the ease with which his board members had accepted the whole trade deal with the aliens. He pushed away the thought that he had himself quite easily accepted the idea as well. Instead he reminded himself that this was a rational solution to the Earth’s huge problem of overpopulation. Not only would this reduce the actual number of people in areas where people were living in poverty, it would also reduce future problems because it was usually these people who had so many children! As one member of the board, who was very good at running statistical analyses, said “such a relatively big reduction in the population in such a short period would more than likely reduce the future rate of population increase by at least 0.0326731 %, over the short term.” Jack could not help being amused how vague this conclusion really was when compared to the extreme accuracy of the number!

And so it happened. The aliens collected their first consignment of hosts from a number of towns in the poorest areas of the poorest countries. Whole communities disappeared in seconds. There were none left behind to tell of the very real yet implausible event. The few who came across the deserted areas had no explanation for the sudden disappearance of hundreds of thousands of people.

When the official reports of the disappearances reached the President, Jack responded with the correct amount of concern and action. He knew the investigation that he set in motion would find nothing. “Everything was going according to plan,” he thought. Nevertheless, that initial uneasy feeling had returned. Was everything going too well?

A problem and its logical rational solution

The aliens returned a week earlier than expected. “We had a slight problem” said Adam. “What is the problem” asked Jack with a sudden sense of foreboding. “The first consignment was not as compatible as we had expected” said Adam. “How is that possible? You were the ones who came to us because of the compatibility!” said Jack, while thinking “does that mean they will want their gold back?”

“No, no.” said Adam as if he had read Jack thoughts. “We have found a solution so the deal is still on. It was just that we had not refined our compatibility test well enough and this we have now done. We now know how to select compatible hosts.”  “So what would be a compatible host then” asked Jack. “People like you” said Adam.

Reference

Krugman P. 2010. The Theory of Interstellar Trade. The Economic Enquiry,48(4):1119-1123.

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[1]  As an economist one is entitled to make assumptions.

[2]  I think this idea was subconsciously planted when reading Krugman’s (2010) article on interstellar trade.

[3]  Translated into English this would be something like Materialia.

[4]  The name of the solar system is not material to the parable.