The answer is that the job of coordination and integration was done through a system – a system of market-determined prices. Information produced by the system triggered appropriate responses from the vast array of independent elements in the system; each element – each business firm and individual – decided for itself what it would do. The same system is responsible for producing not just this book but the billions and billions of dollars worth of other items produced by our nation every year.
In a complex economy like ours, we live in a universe of prices. Almost everything imaginable bears a price – not only goods, but the stocks and bonds of corporations, the right to use somebody else’s money, the right to use somebody else’s land or house or apartment, the right to receive the services of some other human being. It is the price that any of these things commands that will determine whether its owner will or will not be willing to do a particular job or hand over the desired good or let another person use his money, his land, his house, his apartment, or anything else he owns. Prices, in effect, glue the system together and establish a relationship between one thing and all other things.
Every price is a ratio between the value of one unit of a particular thing and the value of all other things – or, at any rate, of all other things that bear a price. (There are, after all, some things that do not bear a price – a mother’s love or a sunny afternoon.) Thus, prices really state that the ratio between a carton of milk and a bus ride is 2:1, if the carton of milk costs $.60 and the bus ride $.30. Similarly, prices establish a 10:1 ratio between automobiles and color television sets, if the automobiles and color television sets, if the automobile costs $5000 and the color television set $500. Of course, prices in the real world fix such ratios with far greater exactitude than we have done here, and for every single item, and in relation to all other items.
While few things look more ordinary than a mass of price data, the concept of price is, like the wheel or the alphabet, one of the most important creations of the human imagination that has made possible man’s social development.
Prices are so much a part of our environment that it may come as a shock to realize that literally nothing in nature bears a price. Every price is a human fiction, a creation that results from the interaction of human beings.
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