The free market isn't necessarily free

Despite the current financial crisis, there's no better economic system in the world than the one we enjoy in the United States.

We recently read a column by George F. Will in Newsweek making that point, citing economist Russell Roberts's book, "The Price of Everything: A Parable of Possibility and Prosperity."

In his illustration, a student, protesting a big box store's doubling of prices following an earthquake, received a lesson about pencils from an economics professor.

There's no "pencil czar" controlling the manufacture of a pencil, Will recounts out in his column. Instead, each person that provides the raw parts simply responds in their own interest to market conditions, which organize themselves to efficiently produce a pencil.

From the loggers who fell the cedar trees, to the truckers who haul them, manufacturers who built the machines to cut the wood into five-sided portions to hold the graphite mined in Sri Lanka, Mexico, China and Brazil. The miners and smelters produced the aluminum ring that secures the rubber eraser produced somewhere far away, and the No. 2 pencil is finished up with paint produced in another place entirely.

The magic of the profit incentive orchestrates the entire process far more effectively than could a single manager.

The stores that didn't raise their prices following the earthquake really didn't do anyone any good, Roberts contends, because needed flashlights and other items were snapped up at regular prices by people who might otherwise have found cheaper substitutes -- like candles -- at home.

The parable continues that artificially supported enterprises, like the post office, agricultural products, ethanol and mediocre public schools "live on forever" while inferior products die out quickly when Darwinian market forces are allowed to operate naturally.

We have to admit we were taken with the story, which generally rings true when the market operates under truly free conditions.

Then we happened to glance at a yellow No. 2 pencil at home. Stamped into its side were words that meant all bets were off: "Made in China."

In contrast to the pencil in Roberts's story, perhaps none of the suppliers of the wood, graphite, aluminum and rubber that went into this writing instrument were concerned with profit, or needed to be.

Somewhere in that still-totalitarian country, we're sure, there's a "pencil czar" giving orders to this day.