The Parable of Al and Bob

(Productive capacity must not be assumed)

Al has an idea for a new manufactured product called "the widget". He spends an entire year building a factory on his own land. Now that the factory is built, he can churn out widgets at a rate of 1 every 5 minutes. Each widget bears a unique serial number, and Al begins selling widgets on the market.

Less than a week later, Bob has accumulated 100 widgets. Interestingly, the serial numbers on Bob's widgets do not match any of the ones the Al has produced from the factory. Somehow, more widgets have been produced than Al was aware of. Our task is to figure out who these new widgets rightly belong to.

Where did Bob's widgets come from? There are 2 possibilities, and we must use our reasoning skills to decide which is correct. Either Bob has built his own factory, on his own land, and is now able to make his own widgets, or else Bob has been sneaking into Al's factory at night, and making unauthorized widgets.

Even if we don't have direct knowledge about what Bob has been doing lately, we know that he must have been using Al's factory. It would take a year for Bob to build his own factory, and here he is with a hundred widgets less than a week after Al opens his factory!

Before Al built his factory, there was no ability to produce widgets at all. The ability to produce widgets did not occur magically. Productive capacity comes into existence due to the purposeful investment and labor of entrepreneurs.

By sneaking into Al's factory, Bob is guilty of property crimes, such as trespass. The widgets produced by Bob rightly belong to Al. Bob should be additionally punished as a deterrent to future crimes.

In his own defense, Bob might make some interesting arguments. Bob could say that widgets are not rivalrous, because his making new widgets did not deprive any previous owners of their use and enjoyment. This would be a blatantly incorrect interpretation of “rivalrous”. From the consumer standpoint, each widget can only be used by one person at a time, thus widgets are rivalrous. From the producer standpoint, the market for widgets is only so big at a point in time. Only so many total widgets can be sold, thus the widget market is also rivalrous.

Bob could assert that his actions have increased the total supply of widgets, improving the overall economy, and helping to promote the visibility of widgets to potential new customers of both Al and Bob. These assertions may or may not be true in this case, but nonetheless are completely irrelevant on the issue of Bob's crimes. Property rights are the very cornerstone of a free market, and a property right means nothing if not the ability to exclude others.

Now let's get intellectual . . .

Keeping in mind the story of the factory and the widgets, let's now make Al a singer-songwriter. Al spends a year writing, arranging and recording a new song called "Forever Mine". The finished song exists as a digital file.  He is able to use his computer equipment to make CD copies at a rate of 1 every 5 minutes. Al is so pleased with his productive capacity that he calls his original song file "the factory", and each copy, a "widget". Al begins selling his song copies, his "widgets" on the market.

Less than a week later, Bob has accumulated 100 copies of "Forever Mine".  We know what happened: Bob purchased one CD copy, and was able to extract the digital file. Bob could then make his own copies at the rate of 1 every 5 minutes. Where did Bob's productive capacity come from?  Comparing it to the example of the factory and widgets, which is it more like? Is it more like Bob built his his own factory on his own land, or is is it like Bob was sneaking in to Al's factory and making unauthorized widgets?

The answer must be that Bob was sneaking onto Al's property. Bob did not make any investment in creating this productive capacity, yet the productive capacity exists.