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Joe Flacco's salary and Adam Smith's paradox of value

The op-ed pieces that are occasionally presented by local professors are eye opening, not for their insight but for their lack thereof. If professor Don Norris ("Flacco's contract shows America's skewed priorities," June 121) had taken an Economics 101 course, he would have certainly studied the paradox of value. In the Wealth of Nations, Adam Smith wrote, "The things which have the greatest value in use frequently have little or no value in exchange; on the contrary, those which have the greatest value in exchange frequently have little or no value in use. Nothing is more useful than water: but it will purchase scarce anything; scarce anything can be had in exchange for it. A diamond, on the contrary, has scarce any use-value; but a very great quantity of other goods may frequently be had in exchange for it."

Smith's solution to this apparent paradox was that the value in exchange of a thing is determined by its supply relative to its demand. As for Joe Flacco, his compensation is not derived from the value that he provides to society, which like the diamond has little value in use, but to the scarcity of his skills. There are may be only 50 people in the world that can quarterback a professional football team. As for the professor, he may not be as abundant as water, but there are millions of individuals with the professor's skills.

The professor is about to learn another economic concept: creative destruction. As massively open on-line courses become the new paradigm of learning, there will be many professors who will find more to lament than Joe Flacco's compensation.

Steve Williams, Towson

Copyright © 2014, The Baltimore Sun
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