Economics 101

The Miracle of the Market Process

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Our ongoing discussion has focused on the importance of understanding economic principles to better understand a holistic definition of stewardship.  Our recent foray into understanding prices and their coordinative function as well as their role in helping us overcome the knowledge problem makes us aware of God’s handiwork in modern market exchange.

It’s amazing that we get anything accomplished at all given the constraints humans face.  Most of human history has been an ongoing effort at survival. Before the Industrial Revolution men were unable to unleash their creativity in the way that economic freedom has since allowed us.  Economic freedom allows markets to work.  Markets are not a place we go to, like the grocery store.  Markets are dynamic and interactive.  According to economist, Ludwig von Mises in Human Action,

The market is not a place, a thing, or a collective entity.  The market is a process, actuated by the interplay of the actions of the various individuals cooperating under the division of labor.  The forces determining the—continually changing—state of the market are the value judgments of these individuals and their actions as directed by these value judgments.

There is a miraculousness to all of this exchange that allows mankind to offer up their uniqueness to the world through the exchange (both market and non-market) of goods and services.  There is a great story called I, Pencil, published in 1958, which I think captures this miraculousness.  It is a short story told from the point of view of a pencil.  He tells how not one person in the world knows how to make him, even though he is seemingly so simple:

I am a lead pencil—the ordinary wooden pencil familiar to all boys and girls and adults who can read and write.

Writing is both my vocation and my avocation; that’s all I do.

You may wonder why I should write a genealogy. Well, to begin with, my story is interesting. And, next, I am a mystery—more so than a tree or a sunset or even a flash of lightning. But, sadly, I am taken for granted by those who use me, as if I were a mere incident and without background. This supercilious attitude relegates me to the level of the commonplace. This is a species of the grievous error in which mankind cannot too long persist without peril. For, the wise G. K. Chesterton observed, ‘We are perishing for want of wonder, not for want of wonders.’

I, Pencil, simple though I appear to be, merit your wonder and awe, a claim I shall attempt to prove. In fact, if you can understand me—no, that’s too much to ask of anyone—if you can become aware of the miraculousness which I symbolize, you can help save the freedom mankind is so unhappily losing. I have a profound lesson to teach. And I can teach this lesson better than can an automobile or an airplane or a mechanical dishwasher because—well, because I am seemingly so simple.

Simple? Yet, not a single person on the face of this earth knows how to make me. This sounds fantastic, doesn’t it? Especially when it is realized that there are about one and one-half billion of my kind produced in the U.S.A. each year.

Pick me up and look me over. What do you see? Not much meets the eye—there’s some wood, lacquer, the printed labeling, graphite lead, a bit of metal, and an eraser….There is a fact still more astounding: the absence of a master mind, of anyone dictating or forcibly directing these countless actions which bring me into being. No trace of such a person can be found. Instead, we find the Invisible Hand at work. This is the mystery to which I earlier referred.

It has been said that “only God can make a tree.” Why do we agree with this? Isn’t it because we realize that we ourselves could not make one? Indeed, can we even describe a tree? We cannot, except in superficial terms. We can say, for instance, that a certain molecular configuration manifests itself as a tree. But what mind is there among men that could even record, let alone direct, the constant changes in molecules that transpire in the life span of a tree? Such a feat is utterly unthinkable!

I, Pencil, am a complex combination of miracles: a tree, zinc, copper, graphite, and so on. But to these miracles which manifest themselves in Nature an even more extraordinary miracle has been added: the configuration of creative human energies—millions of tiny know-hows configurating naturally and spontaneously in response to human necessity and desire and in the absence of any human master-minding! Since only God can make a tree, I insist that only God could make me. Man can no more direct these millions of know-hows to bring me into being than he can put molecules together to create a tree.

For the full article, click here.

These words, written by Leonard E. Read over fifty years ago, are the best I have found at capturing the power and God-given miracle we see at work in markets.  Markets allow men and women to serve others by enabling us to offer our gifts to the world.  We must not take the functioning of markets for granted. Rather, we are required to understand them to understand how we can serve God and the common good.

Question: Do you realize that even the simple things you use in life are the products of a miraculous market process? 

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