In economics, religion, and politics, the moral path is freedom.

Millions of people spontaneously work together to make your pencil – “I, Pencil: The Movie"

Likewise for everything you ever use – millions of people working together created it not knowing what they were actually working on. Why?

“Voluntary spontaneous cooperation”

[youtube=http://www.youtube.com/watch?v=IYO3tOqDISE&feature=player_embedded]

From the waitress serving lunch for the lumberjacks cutting down a cedar tree, to the miners pulling ore out of the ground, to the engine room crew on a freighter bringing the ore to the U.S. to the engineer driving the train bringing the pencil to the regional distribution center to the forklift operator loading the truck that carries stuff to restock your neighborhood store, millions of people worked together to create the pencil you will hold in your hand during tomorrow’s staff meeting.

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By Jim Ulvog, ago

How to guarantee shortages – make the price signal illegal

New Jersey has apparently made supply and demand illegal. The power of the state will hammer anyone who charges more than the state feels is reasonable by their standards. See Price gouging complaints in New Jersey as merely one report on the topic.

Making it illegal to sell stuff at the market price guarantees the shortages will get worse. Why?

People will panic-buy things they don’t need, retailers may not be able to get replacement stock, and some retailers may have to close their doors when they run out of stuff. 

As a natural and logical result, other people who really need something will find only bare shelves.

But it sure feels good to rant against ‘price gouging’.  Makes for great sound bites on TV.

On the other hand, if you let prices rise, the price signal will allocate the scarce goods to people who really need them. Why?

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By Jim Ulvog, ago

Pricing mechanism did its job during California gas shortage – you could get gasoline if you wanted it

The recent gas shortage in California is a superb illustration of the idea that if you don’t meddle with prices and just leave them alone, they will communicate to everyone how scarce a resource is. The natural and expected result is that people who want the resource can get it.

Prices worked

The recent gas crunch shows what happens when you let the market work. Prices spiked because of a supply crunch. People who didn’t really, really need gasoline held off on topping their tank. People who really, really did need gas could get it.

Two things prove this to me.

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By Jim Ulvog, ago

Spotting wrong questions

“The uncreative mind can spot wrong answers, but it takes a very creative mind to spot wrong questions.” 

–Antony Jay,  British writer, broadcaster, director and actor

I’m planning to use that quote in several posts I want to write soon, so I will put it here to have it on the table.

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By Jim Ulvog, ago

Prices have information – they drive buyers and sellers

I can’t explain all the economics lessons in the following joke, but can tell there are many.  Funny thing about prices is that they motivate buyers and sellers.  Prices contain a lot of information.  We need to interpret them well.  Here’s an insight on pricing and human behavior:

today’sFUNNY===========================

A woman walks into a butcher shop and asks the butcher how much a pound of tenderloin is.

“$12 per pound,” replies the butcher.

“Are you sure? That can’t be,” says the lady.

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By Jim Ulvog, ago

“I, Smartphone” – it takes millions of people and thousands of inventions to make a smart phone

Millions of people work together to build that smartphone you are using. No one person has the know-how to build it. Thousands of inventions were needed before making the first one.

“I, Smartphone”, from the Institute for Faith, Work & Economics, is a superb visual explaining the long supply chain and incredible range of skills needed to get that phone into your hands.

[youtube=http://www.youtube.com/watch?v=V1Ze_wpS_o0&feature=player_embedded#t=17s]

The link if needed: http://www.youtube.com/watch?v=V1Ze_wpS_o0&feature=player_embedded#t=17s

This is an update of the classic “I, Pencil”, which I mentioned here.

No one person has the skills

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By Jim Ulvog, ago

"I, Pencil", or, how many millions of people does it take to make one pencil?

No one person on the planet has all the knowledge or skills necessary to make one pencil. It takes multiple millions of people contributing their specialized skills just to make one.

That story is told in “I, Pencil: My Family Tree as told to Leonard E. Read”, which you can find here.

I’ve long been aware of that article, but am embarrassed to admit I’ve never read it before today.

It is brilliant.

Here’s the core idea:

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By Jim Ulvog, ago