One of the most important lessons I learned about economics during my time at Luther College came from Professor Wade Shilts on my very first day of Econ 130: Principles of Economics. In his interest of full disclosure to his students, Wade (as he prefers to be called) warned us that economists see the world differently – and they tend to come across as bizarre and at times annoying characters as a result. Ten years following my graduation, Wade’s words have proven true. Just ask my wife!
Case and point, check out these boxes on this pallet!!
Does this sight not rank among the most beautiful examples of economic liberty you’ve seen in recent times?!
On the surface, no. It’s a couple of boxes. A pallet. Some banding. A few stickers. On the surface, this is probably the most boring photo I could possibly feature in a blog post. But let me tell you the story behind this photo.
Beauty in the Eyes of an Economist
I snapped this photo at my father’s manufacturing company last Friday. Inside these boxes are products we manufacture for a company located in Mexico. On Monday of last week (just four days before this photo was taken), our customer contacted us with a hot request: They needed more products ASAP!
Our customer’s urgent request set in motion a series of free market events. Internally, our company immediately began production on these products – but we needed to obtain additional raw material to finish the job. We sent a “hot rush” purchase order to our vendor, who in turn rearranged their production schedule to meet our sudden hot request. We received the additional raw material just three days later, after which point we all chipped in to get the job done: one of our managers finished the products and I packaged them up. I called the truck company to schedule transportation, and they picked up the freight less than an hour later. On down to Mexico the shipment went – less than one week after the customer’s urgent request came in!
If you think that sounds like good business, I agree. We take great pride in our quick responsiveness to our customers’ ever-changing needs. That’s beautiful in my entrepreneur eyes – but my economist eyes see beauty far beyond that.
As I packaged this shipment last Friday, I began thinking about all the efforts we members of the supply chain made in order to make this rush shipment happen. New demand suddenly emerged in the marketplace, and we suppliers immediately took appropriate action to fulfill it. Laborers, managers, administrators, truck drivers, raw materials, equipment, energy, capital, means of communication, physical infrastructure, and so much more – we suppliers naturally and automatically aligned our interests to utilize our available resources to get the job done quickly and efficiently despite the lack of a “master overseer” to direct our actions. Marketplace signals accurately guided our actions, and products were created as if under the direction of “an invisible hand.”
It was yet another time when Leonard E. Read’s essay I, Pencil came to life in the real world – just as it does each and every day with every free market transaction we make. It’s truly phenomenal to consider!
Incentivized to Serve
Why did we suppliers quickly and efficiently align our resources and efforts to deliver products to customers downstream? The quickest answer – and one I think Wade would enjoy – is that we had incentives to do so. Throughout the supply chain, customers asked suppliers to provide them with valuable products and services, and they promised to compensate suppliers for their efforts by giving them value (i.e. money!) in return. Value was traded for value, so all parties in the supply chain were eager to serve one another through voluntary cooperation. It’s just one of the many reasons why I love free market capitalism.
Seeing beauty in those boxes on that pallet isn’t so bizarre or annoying when you see the world like this, right?
Where do you see the principles of I, Pencil at work in your own daily experience? Please share in the comments below!