19 January 2008

Are there non-natural economic opportunities?

This is the first of two posts responding to stupid arguments on another blog.

On Ed Brayton's blog a commenter argued
This is what happens where there is no more natural room for an economy to grow: companies have to start extorting "growth" from areas that were never considered before.
 The rest of the comment was intelligent enough, but I called this comment "nincompoopery."  I'm right and s/he's wrong.  Most people who know anything about economics would say that finding growth opportunities in areas never considered before is entrepreneurialism.  In fact the growth of economies--always and forever, from the ancient past to the far future--depends on people finding economic opportunities that weren't previously considered.  If they were previously considered, they wouldn't be opportunities for growth!

For example: the richest woman in China, Zhang Yin, made her fortune by recycling scrap paper from the U.S.   She imported the waste paper cheaply, because container ships regularly head from the U.S. to Asia empty, meaning you can get a really good price on cargo going west.  She then used that waste paper to make cardboard boxes and packaging material for goods being shipped right back to the U.S.  How rich can a Chinese woman be?  Try $3.4 billion worth of richness--more than twice what Oprey Winfrey is worth.

Here's the funny part; countless people around the world, including a non-businessman like myself, knew each of the pieces to this puzzle.  
1. There's a surplus of waste paper in the United States--there's not enough demand in the national market to purchase it all.
2.  Waste paper can be used to make packaging for shipping goods (heck, I've done that myself just by wadding up old newspapers).
3. Lots of things are shipped to the U.S. from Asia, creating demand for packaging material.
4. The surplus of container capacity heading from the U.S. to Asia means cheap shipping.

And yet this was an area "never considered before," because even those of us who knew all the pieces didn't realize we should put them together to solve the puzzle.  Consequenlty it was wide open for Zhang Yin to step into and make a fortune.  Was this an "unnatural" economic opportunity?  Or just a case of someone else being more clever than I was?

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