Dogs may not see the gains from trade like humans. Though, like humans, as they engage with other dogs (and humans), they end up figuring it out on their own.

A few days ago, I was walking my friend’s young dog, Steve, and we came upon an older dog, laying on the grass, chewing on a stick. As we got closer, both dogs became seemingly excited to meet each other. The other dog’s human affirmed to me that her dog, a beagle of some type, was super friendly. I told her Steve was very friendly as well.

In the excitement, the beagle dropped the stick and engaged in the usual sniffing ritual. In no time, Steve grabbed the stick and started chewing on it…right in front of him! Moreover, when the Beagle would make his way toward the stick, Steve would turn to him, give a passive-aggressive growl, shooing the beagle away.

The beagle then picked up what looked like the other half of the broken branch in Steve’s mouth. Steve would not have it. He immediately put down his down and went after the stick the beagle had picked up.

This situation reminded me of the Adam Smith quote: “Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog.”

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I’ve recently welcomed a puppy, Becker, to my family. Despite his name, it’s interesting how hard it will be to teach him the gains from trade. But, when we think about it, this phenomenon is never taught–it’s discovered by voluntarily engaging in the process.

The beauty of economics is that it merely illuminates what we already know. It’s not in our economics 101 class where we find out the benefits of trading with other people. We learn that through trial and error as young kids at the playground. When none of the kids want to play with you because you don’t share your toys, the costs and benefits become real enough to cultivate the proper behavior.

Furthermore, kids don’t share their toys because an adult forces them to share their toys. If anything, it makes them not want to share their toys even more! They’ll throw a fit and the benefits quickly disappear.

Often overlooked in the discussion of trade is that there are also gains to be had from not trading. The most important factor behind the benefits of exchanging is when trading is voluntary.

While watching Steve steal and keep the stick away from the beagle, I was tempted to intervene and force Steve to share the stick. But, like kids, forcing the pup could mess up the discovery process. What’s more, is that we might get in the way of their own subjective value. Alas, I don’t speak dog. Sure, we might have some gut feeling that trading the stick is probably beneficial for both dogs. But, what if, there was more to it than each having the stick to chew on? What if there are benefits to playing “keep the stick from you”? What if there is value in building a playful relationship with the other dog that is done by stealing the stick from you?

The point is that we only find out the benefits (and costs) from trading by voluntarily engaging in the process. We don’t have to get ruff with them. The pups, like us, will figure it out on their own.


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