There once was a man who entered a shoemaker’s shop and told the proprietor that he liked the pair of shoes on display and wanted to know the cost. The shopkeeper responded that the price of a new pair of shoes was one hundred dollars. The man tried on the shoes, liked them, pulled out his money, and paid the shoemaker the required sum.
The shopkeeper wrapped the old shoes in paper, and the man tucked them under his arm to leave, wearing his new shoes. As he exited the shop, another man entered and indicated that he needed desperately to purchase a pair of shoes.
“How much will you charge for the shoes?” the second man asked.
“My shoes cost one hundred dollars a pair,” the shopkeeper answered.
“But I have only fifty dollars.”
Thereupon, the man who had just purchased his shoes stepped forward and pulled from under his arm the package that contained his used shoes. “I have here a good pair of shoes that I would be willing to sell for fifty dollars. Try them on.”
The second man tried on the shoes and found they fit very well indeed. “These will work just fine,” he said. He gladly pulled out his fifty dollars and paid for his shoes.
Both men left the shoemaker’s shop smiling. Both ended up better off. They shook hands and went their separate ways.
Now both men bought a pair of shoes that day. Each had paid fifty dollars for his pair of shoes. The one man ended up with a used pair of shoes for his fifty dollars. The other man had walked away with a new pair of shoes for his fifty dollars.
The story of the shoes has always intrigued me. As a boy I determined that if it were all the same to everyone, I would like to be the man who ended up with the brand new shoes for the fifty dollars. A second look at the simple story reveals that there are a lot of interesting principles involved, and one element in particular made me curious.
In order for the successful transaction to take place, it seemed that there had to be someone who was perceptive enough to see the need, quickly find a solution, and rearrange the resources to everyone’s benefit. There had to be an individual who would step forward and become a change maker. Individuals who possess those problem-solving skills within an economic society are known as entrepreneurs.
A person who has entrepreneurial abilities can take something that appears to be of lesser value and reorganize it into a product or service of added value. There has to be someone who sees a need and realizes that he has tucked away in a package under his arm exactly what’s necessary to make everyone in the situation better off.
This is the basic principal of cultural economics—everyone’s better off!