Two young girls sit on the front porch of an idyllic suburban home, staring at the wonder that is the modern smartphone. After one girl lists all the things the smartphone can do—“I can watch movies on it, read a book, talk with my friends on the other side of the country, face to face!”—the phone comes alive.
In a cheery British accent, the smartphone names its seemingly unlimited features, prompting the other girl to say, “I want one; make me one!” The smartphone then explains that “no one knows how to build even one of these things”—that millions of inventors, designers, miners, oil drillers, and factory owners around the world are needed to create just one. The smartphone enthuses that the competitive forces between smartphone providers help “inspire my company to make me more fabulous!”
While the girls listen in awe, the smartphone concludes that its existence seems “magical.” And when it comes to grasping the reach and forces of the market system, magical seems the appropriate word. Markets have enabled progress and prosperity far beyond what anyone even a century ago could have imagined. Productivity per person, an enhanced standard of living, and the incentive for innovation all trace back to the forces of the market system (the producers, buyers, sellers, and others who participate in the creation, distribution, and use of a product or service). A well-functioning market offers lower prices and higher quality products. Indeed, as the smartphone reminds us, when we consider the various goods that emerge out of the “flowering of free cooperation, competition, and creation,” we have reason to marvel.
This is the lesson of ...1