To make even one vial of the simplest and least-expensive modern ink requires the knowledge and efforts of many, many people. There are those who find the appropriate vegetation, those who design the machines for extracting the colourings, others who operate those machines, and another group of people who mix the extracted chemicals with the other ingredients in order to make the resulting liquid work well as ink. And these steps are only the beginning.
The machines used to extract the colourings from the roots, berries, or tree bark are powered by electricity. So we need knowledgeable electricians to equip factories with electrical wiring. Other specialists are required to design the electrical-generating equipment that sends electricity coursing through the factories’ wires. In addition to each of these specialists, others must manufacture the wires themselves, a process that involves yet different specialists to find and mine copper, iron ore, and bauxite. And then even other specialists are necessary to perform each of the many steps involved in transforming these raw minerals into copper, steel, and aluminum wires.
And I’ve so far discussed only the ink. What of the paper? What kinds of trees are used to make it? Where are these trees found? Although neither you nor I know the answers to these questions, someone must know. Whoever those specialists are, they are essential to the existence of the printed page now before you.
In addition to those particular specialists, though, the production of paper requires countless other specialists—ones who know how to make the blades for the chainsaws used to cut down the trees; ones who know how to explore for the oil used to make the fuel that powers those chainsaws; ones who know what chemicals, and in just what proportions, must be mixed with the wood pulp in order to transform that pulp into paper; ones who know how to arrange for insurance on the factory in order to make the operation of that factory economically feasible; ones who know how to design, and others who know how to operate, the machines that package the paper for shipment to the printer’s workplace. This list of different people each with specialized knowledge and information goes on and on and on.
No single person knows more than a tiny fraction of all that there is to know about how to make the ink and paper that you are now reading. What’s more, no single person—indeed, not even a committee of geniuses—could possibly know more than a tiny fraction of all the details that must be known to produce the ink and paper that you now hold in your hands. The details that must be attended to in order to produce these products are truly so vast and complex as to be beyond human comprehension.
Of course, each individual worker plans and consciously guides his or her actions. Each individual firm plans and manages its activities. There is conscious planning and adjustment going on at the level of each individual and each firm and each distinct organization. But there is no overarching—no “central”—plan for the whole. No conscious, central plan or blueprint knits each of the millions upon millions of individual choices, actions, plans, and slices of knowledge into the larger outcome of “the economy.” That larger outcome is, as F.A. Hayek described it, spontaneously ordered.
But how? What exactly is this social institution that coordinates the choices and actions of so many people, each with different slices of knowledge and information, into an overall pattern of activities that works so remarkably well? The answer is voluntary exchange, or markets that are based on private property rights and freedom of contract. That is, for individuals to be able to exchange in markets (sell and buy) they must feel confident in the security both of their own property and that of those they exchange with, as well as in the legal system (contracts) within which they operate. And the prices that emerge on these markets through thousands, even millions of exchanges, are the crucial signals that guide us every day to make those economic choices that result in the complex and highly productive economy that we too often take for granted. Market prices, as we’ll see in the next section, guide each of us to act as if we know about—and as if we care about—the preferences and well-being of millions of strangers.