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Four Amazing Differences

There was no one day or year in which humanity declared independence from the hierarchies, traditions, superstitions, fears, and prejudices that for millennia kept our ancestors mired in deep material poverty. This economic declaration of independence took more time than did – and was done unawares compared to – the political declaration of independence that happened in Philadelphia in July of 1776. Had there been, contrary to fact, such an identifiable revolutionary moment for economic freedom, it would – it should – be celebrated with even more joy and gratitude than we Americans rightly bring to the celebration of the courage and wisdom that inspired Washington, Adams, Jefferson, Franklin, and their colleagues to declare America’s political independence from Great Britain.

In my latest column for AIER I identify four ways – four amazing ways – in which the lives of those of us living today in the modern, capitalist global economy differ categorically from the lives of nearly every human being who lived before the dawn of capitalism. A slice:

A third way that our lives today differ categorically from the lives of all humans who lived before the dawn of capitalism is that the sheer number of people whose knowledge, skills, and efforts are necessary to produce the goods and services that we are accustomed to consume on a regular basis is astronomical. Not only are we today utterly dependent for our survival on strangers, the number of strangers on whom we depend is mind-bogglingly large.

This reality is true for even seemingly simple goods such as pairs of jeans, oranges, and window panes. But this reality is better seen by pondering a more ‘modern’ yet still commonplace good, such as a smartphone. The glass on the phone’s face is made of materials that some strangers found by exploring and that were then processed by other strangers into glass. Yet different strangers programmed the codes that allow the phone to work, while other strangers designed the microprocessors – little marvels that were physically produced by machines made by still other strangers and then transported to the factory for assembly by yet different strangers. Each app, of course, is the product of the minds of other strangers still.

I don’t know – no one could possibly know – the exact number of persons whose efforts were devoted to producing your smartphone and keeping it operational. But I’m confident that this number is much greater than one million – in fact, it’s likely multiple times greater. When this number is added to the number of strangers whose efforts were devoted to producing your living-room couch, your HVAC system, the latest medicines that you ingested, your automobile, and the commercial-air flight that you’ll next take to visit your parents or to close that business deal, the number of strangers who routinely work for you likely numbers well over a billion.

Even more wow.

The fourth categorical difference between our lives and those of our pre-capitalist forebears is that almost everything we consume is something that no one person knows how to make or could possibly know how to make. This incredible claim warrants repetition: Nearly everything that we consume is something that no one does, or could, know how to make.

The most famous explanation of this marvelous reality is Leonard Read’s brilliant 1958 essay “I, Pencil.” The production of something as commonplace, as inexpensive, and as seemingly simple as an ordinary pencil requires the knowledge and efforts of so many different individuals that no one person – indeed, no committee of tireless geniuses – could possibly possess such knowledge. This inconceivably vast amount of knowledge is dispersed across the minds of countless specialized producers, nearly all of whom are strangers to each other as well as to the final consumers of their products. And yet we have pencils in such abundance that an ordinary American worker today need toil only 13 seconds to earn enough income – ten cents – to purchase a new pencil.

Reflect on this fact: An ordinary (“nonsupervisory”) private-sector American worker today, who earns about $27 per hour, can earn enough income in a matter of seconds to purchase something the production of which is so complex that no human being can hope to know fully all that is involved in its production and, hence, that requires the knowledge and labor of millions of strangers.

What causes the great and overwhelmingly successful coordination across the globe of the productive efforts of billions of strangers? And why is this coordination so silent and incessant that we take it for granted? We hardly notice it.

We hardly notice this vast occurrence of global cooperation and coordination, that is, until our attention is drawn to it by a competent teacher of Econ 101. That teacher’s task then becomes that of revealing the logic of how market prices, profits and losses, competition, and innovation drive the specialization and the innumerable efforts that make our marvelous world a reality.

The learning adventure is glorious!