Video: Lesson 2 – I, Pencil Extended Commentary: Connectivity

Description: 

Each day we benefit from countless acts of cooperation. Free markets encourage cooperation, which leads to social progress and prosperity in a civil society. Competition, specialization and the division of labor are important elements necessary for free markets to prosper. Through trade, we are increasingly becoming connected to one another.

In this lesson students will watch and discuss a video “I, Pencil Extended Commentary: Connectivity” by the Competitive Enterprise Institute. Next students will participate in a class discussion thinking about cooperation and specialization. Lastly, students will read and discuss an article “Markets and Freedom” by Dwight Lee.

 

Time Required:

45 min

 

Required Materials:

Internet connection, writing instrument 

 

Prerequisites:

Module 6 – What Institutional Factors Encourage Entrepreneurship?

 

 

7.2.A – Watch and discuss the following video using the questions below to guide your discussion [15 min]:

Video:(CEI, 3:26 min)

“We are connected to people in distant places in ways that are unimaginable. When you buy a pencil, you are helping people do things they value through markets. This video contains commentary from:

-       Art Carden, Assistant Professor of Economics at Samford University;

-       Deirdre McCloskey, Distinguished Professor of Economics, History, English and Communications at the University of Illinois at Chicago

-       Lawrence W. Reed, President of the Foundation for Economic Education

-       Walter E. Williams, John M. Olin Distinguished Professor of Economics at George Mason University”

Discussion Questions: I, Pencil Extended Commentary: Connectivity

1.  In what ways are we connected to other people through trade? What is the connection to others (including others in the past and in the future)?

1. The cooperation that emerges in the market has created systems where millions of people are all working to the mutual benefit of each other. The story of I, Pencil uses the story of an ordinary object to illustrate the ways in which we are all connected.
2. “When you use a pencil, you are not only using the knowledge and the wisdom of everyone in the supply chain today, you are also using the knowledge and the wisdom of everybody who helped contribute to the knowledge that is embodied in the pencil that we have.” – Art Carden
3. When you produce, create, and trade, you are leaving a legacy.

 

2.  As discussed in the video, what happens when people act independently to produce everything themselves?

1. Prof. Walter E. Williams explains, “If you look at the things that we enjoy each day – our eye glasses, our cars, our food, we depend on others. We don’t produce all these items ourselves. Now, if you want to see independent people, you go to Borneo. Those people in Borneo, they produce their own houses, their own food, their own clothing - but they’re much poorer as a result.”
2. It is much more time consuming and costly for a society to have people that independently produce everything they want to consume. Through specialization and trade, people produce what they’re best at producing and trade with others. Everyone is relatively better off because they can spend less time working, and consume a wider range of goods and services that they could not previously consume.

3.  What are some of the benefits beyond material prosperity that the author discusses in the article?

1. The author explains, “The valued result is buyers and sellers responding to each other, becoming more attuned to what people around them want, and helping to create a community in which their role is an important one. Thus, traders make a living while at the same time becoming worthy of their own esteem. Successful traders become esteemed and worthy of esteem because they went to market with a vision of how to make people better off. At the end of the day, they go home not only materially enriched but vindicated.”
2. The author believes that the division of labor and trade enables people to have a greater range of goods and services & increases the self-esteem of entrepreneurs.

 

4.  Whose cooperation do you rely on for the goods and services you enjoy day to day? What people had to cooperate just for you to get your food and clothes today? What would happen without cooperation made possible by the market?

1. Everyone relies on an incredibly complex network of cooperation. Every time you consume an item it relies on the cooperation of all the people who are involved in producing materials for that particular item.
2. Without this cooperation & trade, everyone would have to produce by themselves every good they wish to consume. This would be incredibly time consuming for each individual. Each person would not be able to consume a wide range or large amount of goods and services.

7.2.B – Complete the following activity and share your results with the group [15 min]:

Activity: Voluntary Cooperation

We depend on an incredibly complex network of cooperation. Each day we benefit from countless acts of cooperation. Cooperation is an act of working together for mutual gain and has many advantages. Trade is a type of cooperation where both parties expect to gain. This allows people to specialize and rely on the cooperation of exchange with other people. It frees people to grow and improve their skills, increase knowledge, and utilize the luxury of free time to engage in other meaningful activities.  With more trade, people become wealthier and they also become more and more interdependent on the cooperation of others. The market is an interpersonal, complex, network of cooperation and mutual gain. Not only can we accomplish more freely trading with one another, we also make available time to build our individual talents and pursue our dreams of a meaningful life.

Teacher Tip: It should be stressed that there is voluntary cooperation at each step.

Identify and list the people whose cooperation you rely upon for food, clothing, shelter, entertainment, and education. Be prepared to share with the class.

 

Goods/Services:	Voluntary Cooperation:
Food
Clothing
Shelter
Entertainment
Education
Other

 

 

 

7.2.C – Read the following article and answer the questions below [15 min]:

Article:  Markets and Freedom by Dwight Lee (FEE.org) – “The social cooperation that emerges in free markets permits the specialization on which prosperity depends. We would be much poorer without the specialization that is possible only when large numbers of people can coordinate production and consumption through market exchange. But even more important than the material wealth we realize from the marketplace is the benefit of freedom.”

(Left): Satellite image of the world at night. The bright lights represent areas of prosperity and freedom with markets that generally encourage  free trade.

 

Discussion Questions: Markets and Freedom

1.  What is the importance of economic freedom in a complex economy where people are connected through trade?

1. People can accurately communicate costs to one another, enter and exit the market as they wish and purchase goods and services at mutually agreeable prices. Dwight Lee explains, “Destroy freedom and you destroy the information flows that are the essence of market economies.”
2. Freedom promotes wealth in the market.

 

2.  What needs to be in place for markets to work efficiently?

1. Markets need freedom in order to allow consumers and producers to interact with one another and communicate information through prices.
2. Markets also need laws to protect private property, without which people would not have an incentive to create something of value for the market or pay for the goods and services they consume.

 

3.  What is the relationship between freedom and markets?

1. Dwight Lee explains, “Markets require freedom and freedom requires markets” – they are both dependent on one another to work. Markets need freedom in order for consumers and producers to effectively co-ordinate actions and communicate with one another.
2. Freedom needs markets because freedom cannot work in society without having some way of making people accountable of their actions.

Teacher Tip: Assign the following article as Self-Study if class time runs out.

  

7.2.D - Self- Study: Read the article and answer the questions that follow [15 min]:

Article: Competition and Cooperation by David Boaz (FEE.org)

“The market is an essential element of civil society. The market arises from two facts: that human beings can accomplish more in cooperation with others than individually and that we can recognize this. If we were a species for whom cooperation was not more productive than isolated work, or if we were unable to discern the benefits of cooperation, then we would remain isolated and atomistic. But worse than that, as Ludwig von Mises explained, “Each man would have been forced to view all other men as his enemies; his craving for the satisfaction of his own appetites would have brought him into an implacable conflict with all his neighbors.” Without the possibility of mutual benefit from cooperation and the division of labor, neither feelings of sympathy and friendship nor the market order itself could arise. Throughout the market system individuals and firms compete to cooperate better."

Discussion Questions:  Competition and Cooperation

1.  How does the market encourage cooperation?

1. David Boaz explains “The market is an essential element of civil society. The market arises from two facts: that human beings can accomplish more in cooperation with others than individually and that we can recognize this. If we were a species for whom cooperation was not more productive than isolated work, or if we were able to discern the benefits of cooperation, then we would remain isolated and atomistic.”
2. The market encourages businesses to compete to cooperate with consumers. The market also encourages people to coordinate with one another – as this leads to higher achievement, more free time and the ability to consume a wider variety of goods and services.

 

2.  What are the benefits of competition in the market?

1. David Boaz explains “Defenders of the market process often stress the benefits of competition. The competitive process allows for constant testing, experimenting, and adapting in response to changing situations. It keeps businesses constantly on their toes to serve customers.”
2. Competition benefits consumers because companies are forced to constantly improve to offer consumers the lowest prices, best range of goods and services, good customer service and so on.
3. It also promotes productivity and encourages resources to be distributed to their most valued uses.

 

 

Lesson Recap

• Everyone relies on an incredibly complex network of cooperation. Every time you consume an item it relies on the cooperation of all the people who are involved in producing materials for that particular item.

 

• “Markets require freedom and freedom requires markets” – they are both dependent on one another to work.

 

• “When you use a pencil, you are not only using the knowledge and the wisdom of everyone in the supply chain today, you are also using the knowledge and the wisdom of everybody who helped contribute to the knowledge that is embodied in the pencil that we have.” – Art Carden

 

• When you produce, create, and trade, you are leaving a legacy.

 

• Differences in economic growth are explained by differences in institutional arrangements, incentives to invest and the openness of markets to trade.

 

Additional Resources

Article: The Case for Voluntary Private Cooperation by Michael Munger (FEE.org)

“That "feeling of solidarity" is society—voluntary, uncoerced, natural human society. We don't need nations, and we don't need flags and armies to make us prosperous. All we need is voluntary private cooperation, and the feeling of solidarity and prosperous interdependence that comes from human creativity unleashed.”

 

Article: Social Cooperation by Sheldon Richman (FEE.org)

“It is through cooperation and the division of labor that we all can live better lives.” 

 

Video:(18:20 min)

“Matt Ridley discusses why he is a rational optimist at Zurich Minds.”