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  • You Can Build That—with the Help of the Market

    President Obama’s “You didn’t build that” comment has drawn much attention. The reactions from both the President’s defenders and his critics illustrate a profound misunderstanding about how the market actually allows us to cooperate.

    As Milton Friedman, echoing Foundation for Economic Freedom founder Leonard Reed, pointed out: “not a single person in the world can make [a] pencil.” This may sound strange at first, but the reality is that it takes many people, each with different skills, coordinating with each other from around the world to produce a single pencil. The graphite may have come from Italy, the wood from Oregon, and the rubber in the eraser from Malaysia.

    Yet no government direction was needed to bring these people together.

    It is the entrepreneur who brings these people and resources together, guided by a market system in which prices determine the most efficient use of resources. Government planners can never match the ability of the market process to facilitate an environment for cooperation and coordination—no matter how intelligent the bureaucrats or how benign the governing elite.

    This is not simply theory; the Index of Economic Freedom proves that countries with higher levels of economic freedom are also the most prosperous.

    Today, the world economy is much more complex than when Milton Friedman lectured about the production of pencils. Paper and pencil have been usurped by the computer, iPad, and smartphone. Yet as this video from the Institute for Faith, Work and Economics demonstrates, the market process is more important than ever.

    A recent study found that for every $299 iPod sold in the U.S., our reported trade deficit with China increases by about $150; however, the value added via the assembly lines in China is only $10, and much of the value added of that so-called deficit is captured in the U.S. by designers, financiers, and owners of intellectual property. A variety of different producers and service providers from many countries contribute to the complex process that puts an iPod on the shelf in an American store. And all that effort is coordinated by Apple, not the U.S. government.

    The government has a role in society, but it is only through the market process that individuals can cooperate effectively on a grand scale.

    Dylan DelliSanti is currently a member of the Young Leaders Program at The Heritage Foundation. For more information on interning at Heritage, please visit http://www.heritage.org/about/departments/ylp.cfm.

    Posted in Economics [slideshow_deploy]

    3 Responses to You Can Build That—with the Help of the Market

    1. Gerry (FDNY) says:

      It should be quite obvious to all by now, that Obama and his minions have simply lied and told half truths to the american people . This President has led a campaign of deceit and dishonesty in pursuit of His socialist agenda against the will of the American People. Should these Solydra E-Mails really surprise anyone?

    2. Roland says:

      Hitler was the most successful lier (after Osama or is it Obama or J. Carter) that has devoted his twisted views of the U.S. Please read "The Root's of Obama's Rage" and "The Amateur" to discover the real truth …. you will learn why after more than a trillion $ has been spent, the economy and "TRUE" UNEMPLOYMENT is, as he has designed, at 8.3% and growing. You liberal blind sheep following the big black wolf will wake up someday and see the real truth… unfortunately too late if he, Reid (his spokesman) and Pelosi ( "lets vote for Obamacare and see what happens"), the absolute height of ignorance. Obama Sr. was the 100% failure bastard father of Obama even though Obama worships the African ground on which he walked … Obama … the biggest looser the US has ever encountered …. and I thought Carter was pathetic …. the real truth was that he waited too long being the pathetic left liberal he is.. which domed the rescue. Do your research to discover that this was really the cause of the failure.

    3. Real Wisdom says:

      There are liberal jokes that say a factory could not ship if there were no roads built by the government….
      They don't realize that if there were no roads we would not need or have factories… Look at Obama's home village where his mom was when he was born, it is a place with dirt paths for roads and certainly no factories…
      Sadly that is econ ONE in grade school, not even Econ one oh one in college…

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