The price system: the magic wand you’ve been looking for

Don Boudreaux quotes Arnold Kling and writes well about the wonders we enjoy, and take for granted, from the markets and the price system.

This should be taught in schools.

First, Kling:

In a modern economy, no one is self-sufficient.  Instead, people are specialized.  The work you do probably does not produce something you could consume.  Even more striking is the fact that almost everything you consume is something you could not possibly produce.  Your daily life depends on the cooperation of hundreds of millions of other people.

Then Boudreaux writes:

You – you ordinary American you – you wake up and flick a switch or two and light, that does not pollute the indoors of your home, immediately bathes the rooms you occupy. You lift a lever or twist a knob and potable water, as hot or as cold as you prefer, gushes forth for you to use to shower or to quench your thirst.

You dine – at breakfast, lunch, and dinner – on foods that you have no inkling how to grow and process.  On those many occasions when you dine out, you don’t even perform the final stage – cooking – of the food.  Strangers do that for you.

And, so on, listing lots of the modern conveniences we enjoy, then he follows with this:

The worldwide market of which you are a part – indeed, which is responsible for your very existence – is not nirvana.  It doesn’t work as perfectly as our vivid imaginations are capable of conceiving.  But here’s the thing: it works so damn well that what we notice are its relatively few failures to work smoothly; we don’t notice – because it is so common – its routine, smooth, everyday marvelous successes.

The key question is how do those millions of people Kling refers to cooperate?

For the most part, they cooperate through the price system. They sell their specialization through it to earn money and they decide what to buy through it. Each time, information is communicated and rippled through the price system. Yes, that dinner was worth the price. No, that pair of shoes was not.

It’s something we interact with several times a day, but pay little attention to it and few people grasp just how powerful and beneficial it is.

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