Last month I took note of the curious fact that many people find Friedrich Hayek’s classic 1945 essay “The Use of Knowledge in Society” difficult or opaque at first, including even economic geniuses like Thomas Sowell and Russ Roberts. This month happens to be the 70th anniversary of the publication of that essay, and our friends at the Fraser Institute in Canada have begun a video series starring Don Boudreaux explaining Hayek’s ideas. Here’s one on Hayek’s insights into the “knowledge problem” and the importance of prices (about 3:30 long):
Meanwhile, if you want a good illustration of why markets, trade, and prices will always outperform the planners, see this item from the Cato Institute about the fellow who decided to try to make his own sandwich instead of buying it from the supply chain the market has created:
What would life be like without exchange or trade? Recently, a man decided to make a sandwich from scratch. He grew the vegetables, gathered salt from seawater, milked a cow, turned the milk into cheese, pickled a cucumber in a jar, ground his own flour from wheat to make the bread, collected his own honey, and personally killed a chicken for its meat. This month, he published the results of his endeavor in an enlightening video: making a sandwich entirely by himself cost him 6 months of his life and set him back $1,500.
(It should be noted that he used air transportation to get to the ocean to gather salt. If he had taken it upon himself to learn to build and fly a plane, then his endeavor would have proved impossible).
The inefficiency of making even something as humble as a sandwich by oneself, without the benefits of market exchange, is simply mind-boggling. There was a time when everyone grew their own food and made their own clothes. It was a time of unimaginable poverty and labor without rest.
So let’s go back to basics, and one again take in the video of “I, Pencil.” Could have saved our sandwich maker a lot of trouble. (About six minutes long.)