“The Once-ler perceived a market opportunity, displayed extraordinary entrepreneurial spirit and proceeded to create an industry of Thneed manufacturing. His story exemplifies laissez faire economics and the potential of free market enterprise and what’s truly possible if government “stays out” of markets with needless regulations. So what went wrong? ” In order to understand exactly the story of The Lorax as an allegory of economic principles you must understand in terms of different philosophy foundations, scarcity, uncertainty, interdependencies, and the duel nature of rights.
Philosophy foundations are all based on making a choice in any given situation. In the story The Lorax by Dr. Seuss the two main characters, the Once-ler and the Lorax, had conflicting philosophical perspectives. The Lorax’s prevailing philosophical perspective is utilitarianism where the belief is “the greatest good for the greatest number. ” That is, in order to seek a greater social good once must chose the course of action that results in the maximum amount of overall good, not only for one’s own good, but also for the good of others.
More in depth analysis of this perspective shows that “morally appropriate behavior will not harm others, but instead increase happiness or ‘utility’” (Driver, History). The Lorax spoke up against the Once-ler only when he believed the Once-ler was shrinking the happiness that the Brown Bar-ba-loots, the Swomee-Swans, the Humming-Fish and himself, were experiencing in the environment around them from the Once-ler’s production of the Thneeds. The prevailing philosophical perspective of the Once-ler is egoism, that is, maximize one’s self-interest.
In the story the Once-ler had been searching his entire life for trees such as the Truffula Trees to make something like the Thneeds that create business and money, which were all that he needs. The Once-ler didn’t care about the crummies in the tummies of the Brown Bar-ba-loots, or pollution that filled the air and the ponds that forced the Swomee-Swans and Humming-Fish out. The only thing he cared about was making the factory and wagons bigger to meet the capacity of Thneeds he wanted to ship out to make more money.
In the story the Once-ler, the Lorax, the Brown Bar-ba-loots, the Swomee-Swans, and the Humming-Fish are all put in a situation known as Pareto Optimality. This “exists when economic resources and output have been allocated in such a way that no one can be made better off without sacrificing the well-being of at least one person” (Wisdom, V Pareto). In a situation like this it is hard for the perspectives, like that of the Once-ler and the Lorax, to have a positive outcome. If their perspectives had been different, say like ‘the golden rule’ or ‘do no harm’ perspectives, things have a much better potential to come out more ideal for everyone.
As discussed in class, both of these philosophical perspectives believe in withholding harm to one’s self and to others. If these were the perspectives taken by the Once-ler and the Lorax, both would be happy, in addition to the Brown Bar-ba-loots, the Swomee-Swans, and the Humming-Fish, but given the Pareto Optimality environment it is almost impossible to make everyone involved happy, instead there needs to be a more costs-benefits perspective taken where things are weighed out and people pick as a whole what the best usage of resources should be to maximize the outcome for everyone.
The basic economic problem that arises because people have unlimited wants but resources are limited” (Investopedia). In the story scarcity affects the choices and the outcomes realized. The Once-ler held the power of control and chose to use his power over the Brown Bar-ba-loots, the Swomee-Swans, and the Humming-Fish to ignore their requests and use whatever he wanted to make the Thneeds, creating a scarcity among resources. The Brown Bar-ba-loots made the decision to leave town after the Once-ler created a scarcity of Truffula Trees which caused a shortage in Truffula Fruit, the main food that that ate.
The problem with scarcity is that if it isn’t monitored then the resources will eventually run out. The Once-ler didn’t realize the scarcity he was creating among the clean air, Truffula Trees, and pond water by continuously using all of these resources without replenishing them. The outcomes of the choices he made left him with no demand, no money, and no resources to continue on with his business. Uncertainty is very hard to manage. You can’t assign a probability, value or outcome to something that is unknown.
In the story the source of uncertainty is the biological nature of production. When you make poor decisions they are bound to have outcomes with issues of uncertainty. The Once-ler only saw the opportunities the Thneeds gave him incrementally; he didn’t look at the big picture of things. He failed to acknowledge every situation he faced with the Brown Bar-ba-loots, the Swomee-Swans, and the Humming-Fish, thinking they were all part of the standard operating procedures in business, causing each of the potential risks faced to create a much larger ap of uncertainty. By the end of the story the Once-ler poor decisions inefficiently used all of his resources up, forced everyone out of the town, and left him with the inability to manage these unintended outcomes of uncertainty. The interdependencies that are central to the story are asset specificity and high exclusion costs. Asset specificity is the aspect or feature of an asset that makes it useful for one or more specific purpose and therefore cannot easily be sold off.
The Truffula Trees, the ponds, and the air are all goods with specific uses to each individual with the potential to be held hostage by the Once-ler, the Lorax, the Brown Bar-ba-loots, the Swomee-Swans, or the Humming Fish. In order for high asset specificity to occur there should have been some type of contract created between the parties to prevent one single party from taking advantage of the resources to achieve some opportunity.
To avoid the potential of an asset holding situation, a buyer-seller relationship could have been created between the Once-ler and the the Lorax/Brown Bar-ba-loots/Swomee-Swans/Humming Fish. If this had occurred in the story the Lorax, the Brown Bar-ba-loots, the Swomee-Swans, and the Humming Fish wouldn’t have been forced to leave and the environment would have lasted. High exclusion cost goods are what determines the provisions of the good; if the good exists for one user it is costly to exclude others.
The Truffula Trees, the air, and the ponds are all considered high exclusion cost goods. The Lorax, the Brown Bar-ba-loots, the Swomee-Swans, and the Humming Fish had the token right to exclude the Once-ler from using these goods unless he contributes to the production or maintenance of the goods, but they didn’t. This gave the Once-ler the ability to use the Truffula Trees, the air, and the ponds as he saw fit, that is to make the Thneeds, without contributing anything back.
The Once-ler is a clear cut case of what is known as a free-rider; a major problem associated with high exclusion cost goods. Before the Once-ler comes to town, the property rights of the Truffula Trees, the air, and the ponds lie with Brown Bar-ba-loots, the Swomee-Swans, and the Humming Fish; everyone respects the usage of one another and no actions need to be taken to enforce those rights. When the Once-ler comes to town the usage of the Truffula Trees, the air, and the ponds comes into dispute.
The Once-ler has the right to use Truffula Trees, the air, and the onds 24/7. The non-rights duties lie with the Brown Bar-ba-loots, the Swomee-Swans, and the Humming Fish; they must respect and tolerate the Once-ler. The Lorax has the obligation to enforce those rights. If different endowments of property rights occurred, such as an ordinance that limited the Once-ler’s usage of the Truffula Trees, the air, and the ponds, the Truffula Trees, the air, and the ponds wouldn’t have been overused and the Brown Bar-ba-loots, the Swomee-Swans, and the Humming Fish wouldn’t have been forced to leave town.