Can a harmonious society do without written laws, rules, and repressive measures? If men are left free, won't we witness disorder, anarchy, disorganization? How to avoid creating a mere juxtaposition of individuals acting outside of any concert, if not through laws and a centralized political organization?
This is the argument often invoked by those who demand market regulation or that society alone is capable of coordinating individuals into a coherent and harmonious whole.
This is not Bastiat's view. According to him, social mechanisms, such as the celestial mechanism or the human body's mechanisms, obey general laws. In other words, it is already a harmoniously organized whole. And the engine of this organization is the free market.
The miracle of the free market, he tells us, is that it uses knowledge that no one person can possess alone and that it provides satisfactions far superior to anything an artificial organization could do.
Bastiat provides several examples to illustrate the benefits of this market. We have become so accustomed to this phenomenon that we no longer notice it.
Let's consider a carpenter in a village, he says, and observe all the services he provides to society and all those he receives:
Every day, upon waking up, he dresses, and he personally made none of his clothes. Yet, for these clothes to be available to him, an enormous amount of work, industry, transportation, and ingenious inventions had to be accomplished worldwide. Then he has breakfast. For the bread he eats to arrive on his table every morning, lands had to be cleared, plowed; iron, steel, wood, stone had to be converted into work tools; all things that each, taken separately, assume an incalculable mass of work put into play, not only in space but in time. This man will send his son to school, to receive an education that presupposes research, many years of prior study.
He goes outside: he finds a paved and lit street. His property is contested: he will find lawyers to defend his rights, judges to maintain them, justice officers to execute the sentence; all things that still presuppose acquired knowledge, hence enlightenment and means of existence.
Bastiat describes the market as a decentralized and invisible tool of cooperation. Through the price system, information is transmitted about everyone's needs and skills, and it connects people who want to cooperate to improve their lives.
What is striking, Bastiat concludes, is the immense disproportion that exists between the benefits this man draws from society and those he would provide to himself if he were reduced to his own resources. In a single day, he consumes goods that he could not produce himself.
In 1958, American writer Leonard Read (Foundation for Economic Education) published a short essay in The Freeman magazine, written in the manner of Bastiat, which became very famous: "I, Pencil". This text is a metaphor for what a free market is. It begins like this:
I am a lead pencil, an ordinary wooden pencil familiar to all boys and girls and adults who can read and write. It is one of the simplest objects in human civilization. And yet not a single person on this earth knows how to produce me.
It revisits Bastiat's idea of an invisible cooperation among millions of individuals who do not know each other, leading to the construction of something as mundane as a pencil. No one knows how to make a pencil on their own. Yet, millions of human beings unknowingly participate in the creation of this simple pencil, exchanging and coordinating their knowledge and skills within a price system without any superior authority dictating their conduct. This story demonstrates that free individuals working in pursuit of their legitimate interest act more for the benefit of society than any planned and centralized economic strategy.
The 1976 Nobel Prize in Economics recipient, Milton Friedman, also revisited the pencil story to explain to the general public how the market economy works.
In an episode of his television series Free to Choose, he analyzes the various components of something as mundane and simple as a pencil, highlighting the miracle of spontaneous order generated by thousands of economic interactions worldwide. People who do not know each other, who do not share the same religion or customs, still manage to coordinate to produce this object. He concludes that the free market is essential not only to ensure prosperity but also to promote harmony and peace.
Friedrich Hayek, in his essay "The Use of Knowledge in Society" in 1945, already explained why the market economy and the decentralization of decisions are vital for prosperity. According to Hayek, no central planner or bureaucrat could ever possess sufficient knowledge to successfully guide all economic actions. Only the price system in a free market allows millions of independent actors to decide for themselves how to efficiently allocate resources.
Economic planning, which claims to outperform the market, leads not only to a poor allocation of resources but also to the hegemony of one class over another. That is why socialism is not only an intellectual mistake but a mistake that ultimately generates immense injustice.
Quiz
Quiz1/5
eco2035.1
What is the example used by Leonard Read to illustrate invisible cooperation?