One fact of arithmetic that ceaselessly impresses me is that the number of different ways to arrange, in a single dimension, a mere 20 items is much larger than is the number of seconds in ten billion years. (I first encountered this fact in something written by Paul Romer, and was reminded of it by something written by Virginia Postrel.) This simple yet startling arithmetical ditty contains important lessons about economics — some of which I explore in my latest column for the Pittsburgh Tribune-Review.
My conclusion is this:
Private property ensures that resource arrangements will not be random.
Each resource owner chooses a course of action only if it promises
rewards to the owner that exceed the rewards promised by all other
available courses of action.
For each consumer, this means spending money on those items
that best satisfy his individual tastes. For each producer, this means
finding those uses that promise the highest profit. Because profit in
free markets comes from satisfying as many consumers as possible, each
producer is forever on the lookout for better ways to use his resources
to satisfy consumers.
Because private property gives to each resource owner
(including people who own just their own labor) both the power to
reject unattractive offers and incentives to use his resources in ways
that generally do much to help others, the result is a system of
peaceful, productive, mutual accommodation.
F.A. Hayek called this result a "marvel." It’s a breathtakingly
complex and productive arrangement of countless resources. This
arrangement emerges and evolves over time as the result of billions of
individual, daily, small decisions made by persons seeking to better
employ their resources and labor in ways that other people find
helpful.
Although unplanned, this order is governed by a strict logic —
that of mutual accommodation — a logic contained only in the
institution of private property.
