Transcript - Izzit.org

The Price System Part 1The Price SystemTranscriptFor a list of additional resources to use with this video go towww.izzit.org/products and click on The Price System video.EMILY: Oh, great…sounds boring as usual, too much information. Wait! "I the Pencil: ...economist...lecture gives a simple yet…”EMERSON: Simple? What have we found, Emily?EMILY: We? Sit down, Emerson, and "we've" found...FRIEDMAN: We need to understand how it is that a free market works to enable millions of people tocooperate peacefully together. I know no better way to bring this out than by a very simple example that Iowe to an old friend of mine, Leonard Read, who once wrote a little article called “I the Pencil.”PENCIL: I am a pencil, a commonly known implement….yet, I, Pencil, simple though I appear to be,have a profound lesson to teach. And I can teach this lesson better than a car, an airplane or computerbecause I am so seemingly simple.FRIEDMAN: “You know, it’s a funny thing,” he said, “There’s nobody in the world who knows how tomake a pencil.” Now that seems like a silly thing to say, isn’t it? This is just the most obvious thing. It’sonly a piece of wood with something black in the middle and a little red tip at the end. What do you meannobody knows how to make a pencil? Well, suppose you were to start out to set to make a pencil.EMERSON: This isn’t a “how to” video, is it?FRIEDMAN: First of all you have to get some wood. Where do you get the wood?EMERSON: Home Depot?EMILY: Ssh!FRIEDMAN: You have to go to the Pacific Northwest probably and cut down some trees. How do youcut down some trees? You have to have some saws to cut them with. Where do you get the saws? Youhave to have some steel. Where do you get the steel? You have to have a steel mill. So in order to knowhow to make a pencil you would have to know everything there is to know about how to start from ironore in coal and get iron and convert it into saws and cut down trees. But that’s only the beginning. Thisblack stuff in the middle that we call lead isn’t lead. It’s graphite and I’m told it comes from some minesin South America. This little red tip at the top, that’s rubber. Where does it come from? Well, the majorsource of natural rubber is in Malaya, that’s quite another distance.EMILY: Except now it’s called “Malaysia.”1