Dolphin Production

Dolphins can be trained. In study centers, they train them to clean litter from their tanks: find litter, bring it to a trainer, get a fish. Simple, right?

The discussion below will fit in best with the last third of the semester and of the handbook. But, where I’m going with this is that economics is way more fundamental and basic to existence than most other fields you might study in college. As John Cochrane noted:

The sad paradox of free markets is that free markets do not need people to understand them to work.

The economics is there whether we want it to be, realize it, or sometime deny it. Hopefully, we recognize it and can explain it.

When we think about the economics of production, what we’re trying to do is formalize our thinking. At a very basic level, what production amounts to is combining things we’re willing to give up, to make something new, that we consume now (or sometimes save and invest, which ends up with consuming later).

At its most basic level, production combines labor and capital to produce output. Resources are a form of capital (but so are machines and tools … which we ultimately make out of labor and resources). And output is usually something we consume, right?

Back to the dolphins …

The dolphins combine their time and effort, with litter, and get fish to eat. Dolphins are the labor, litter is their capital, and fish are their output.

Big deal, right? Except that we study dolphins because they’re smart. So soon, they become not just labor, but skilled labor.

When we think about efficiently using our resources, what we are thinking about is combining fewer resources to get the same output, or the same resources to get more output.

And the dolphins … find litter, hide it, divide it into smaller pieces, and trade it for the same amount of fish. So they figured out a way to increase their marginal product of capital (MPK). Last time I checked what the generic social term “skilled labor” means when we formalize it is “able to get more production out of the same piece of capital than unskilled labor”.

In humans we’d note that we impart technological innovations to labor to make it more skilled. It’s not really that different than using some of the heat we used to lose from combustion in our engines to clean the exhaust further in a catalytic converter.

So dolphins are demonstrating technological growth. It gets better. Sea gulls are a nuisance to outdoor aquariums, and fortunately the dolphins view them as litter too. So instead of eating the gulls they catch, they trade them for fish (of course, big bird equals more fish). Then a dolphin invested: they saved some litter (instead of converting into fish), used it to bait the sea gulls, and then traded them for more fish … earning a rate of return.

Then then the dolphin who figured this out trained her calf and then others nearby. And now the technology is geographically correlated (within the dolphin culture of that tank), and temporally correlated (since dolphins today are better off than dolphins before).

Of course, not all of this was apparent to the journalist who wrote “Why Dolphins Are Deep Thinkers” for The Guardian. But George Mason University economist Alex Tabarrok picked up on some of the economics in “Dolphin Capital Theory”. And I’m telling you that there’s a growing macroeconomy at the Institute for Marine Mammal Studies inhabited by dolphins.

Go figure.