I watched a video on You-Tube, that to some extent, changed my life. I may be overstating it a little. Yet and still, the stark simplicity and profound depth of the analogy in the clip is breathtaking. The video enlightened my political perspective, it did not replace it. It is the story of The Pencil. Milton Friedman gave a lecture at a university, now immortalized on You-Tube. I strongly recommend watching it.
He opens crediting someone else, Leonard Read's "I, The Pencil", for the idea. In fact you may want to watch Milton Friedman's video before you finish reading this article, he told the story better.
(Here is a link: Milton Friedman the Pencil Or you could search You-Tube for Milton Friedman The Pencil)
Briefly. He describes how no one knows how to make a pencil. Sounded silly to me at first. Then he elaborated and I saw brilliance. The rubber comes from Malaysia, or perhaps some other climatically similar region of the world. Copper is mined as ore from somewhere else. Trees grow and are harvested yet elsewhere. Graphite is also mined as ore. The copper and graphite must be refined. The wood and rubber must be processed. Only then the constituent parts can be combined to manufacture a pencil. No one person knows how to perform every step in this intricate process.
One could purposefully set out and learn all of it, but that belies the whole point. It's an analogy, breaking the analog is foolishly irrelevant. Not cost effective either.
The wonderful part is how people all over the world cooperate. Having never met, never spoken to each other. It does not matter what language they speak, what religion they follow, what continent they were born on, or who they are. Most importantly, without the need for any form of central planning. None of that matters, not even politics. I wonder how many people with those artsy Coexist bumper stickers would also support a free-market economy based on individual property rights and rule of law. Yet that is the true key to the whole thing.
All of this functions best in the absence of special planners. All parties coordinate their efforts efficiently, far better than any human mastermind could manage. They communicate almost instantly, often without words. The method, the brilliance, is the price. They each communicate through setting a voluntary price. When they each pursue their individual self interest, everyone wins.
From this rudimentary understanding of economics, everything else falls into place so neatly and easily that many people who consider themselves more intelligent never seem to understand. We are constantly told how complex a science economics is, when it really isn't. The math can get complicated, the truth is simple. Ironically those allegedly super smart individuals are incapable of grasping the exquisite simplicity of it.
Has anyone ever told you what a free market is? I mean what it really is fundamentally at its core? It is you, it is a group of people like you, free to choose. It is a pure expression of freedom. Why do so many people want to constrain the free market? Why do they want to limit it, create bounds for it? Power.
All humanity, each one of us, is free to own private property and do with it as each sees fit to the extent it does not interfere with another individual human beings property rights. Chief among your property is your life and your person. Rule of law protects this. Free trade means that we can make mutually beneficial exchanges of property. As both parties are free, they both choose to trade for something they value more than what they give. Quality of life increases because both parties value their goods more after the transaction than before.
Assets such as books are practically unlimited, therefore potential wealth is practically infinite. All that needs to happen is someone needs to take the time to create it. Hence wealth can be created. The notion that in economics, for someone to succeed another must fail is then absurd. Certainly it can happen that way, however nothing intrinsically says it must. If John Grisham writes a brilliant novel, does that necessarily limit Stephen King's capacity to write an entertaining novel. Clearly no. Less obviously the same principle applies to all forms of artistic expression. These, and all artists, create something of value, thereby wealth, from the most abundant renewable resource, imagination.
When an ordinary person, working a mundane job, uses their finely honed skills, hard earned experience, God given talent, and hopefully well compensated time to accomplish a task better than others could, for less than still others would, they create value for their employer. If all parties were truly free to negotiate the terms of this exchange, then everyone wins.
All prices are constrained by the market itself. Valuable employees must undercut other valuable employees to get a job. Employers win, and some love to ignore the converse. Employers must compete with other employers for valuable employees, employees win. Producers must compete for customers, customers win. An amazing equilibrium is reached, everyone wins. As long as the market is free, you and others like you are free to choose.
Someone can use the resources available to them to produce something of value that others will gladly pay for. Almost no one is trapped by poverty. Everyone has something. No cheating necessary. Maybe you will have to spend years at an entry level job, patiently building skills in production and customer service. Maybe one day they will give you management training, maybe you'll only get to learn the good and bad from their example. Don't lose hope! With hard work, diligence and determination you will one day understand how to reach your dreams. This is still the land of opportunity.
Soli Deo Gloria
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