Our Living Standards Are Not a "Given." They Are a Gift We Owe to Commerce and Production
by David SmitherIt’s an odd fact of the human condition that we take even extraordinary things for granted. As soon as a good thing becomes commonplace, we assume that its presence is just the ordinary state of affairs, and we forget to be grateful for it. On the other hand, the loss of a good thing often causes us to appreciate it anew. This may never be more true than when your air conditioner goes out right before summer hits in Texas.
Recently, my central AC unit stopped blowing cold air. Being springtime in Houston, this was a big deal that was going to get bigger very rapidly as summer began to swelter. I did some preliminary tests, and determined that the compressor was dead. I could have replaced the compressor and extended the life of the rest of the unit, but since the whole system was pushing twenty years old, I decided it would be a better investment to chuck it all out and start from scratch.
As I write this, a crew of HVAC technicians is gutting my system and one of their colleagues is en route with a brand new unit. They are doing great work, and I’m deeply grateful that the market provides these services, and that I don’t have to be an expert in air conditioning to fix my problem. Given all the variables, I value their expertise more than my money, and am happy to pay these competent men to do the work for me.
This is what the division of labor in the economy is all about. Some people specialise in one thing so that others don’t have to. They offer their expertise to the market—which is properly understood not as an ethereal abstraction but simply as the aggregate of other human beings who consume goods and services—and ask a fair price in compensation.
Other people specialise in other things, and so on and so forth. No one forces anyone to do anything, but the net result is that society is enriched with a plethora of specialised knowledge. This knowledge is maintained and constantly improved by the competent men and women who provide their specialised services to consumers who, like me, value the providers' services more than their money. This is as near a miracle as we may reasonably hope for in economic life.
Under such circumstances, it is literally true to say that commerce is always a win-win for the parties involved. Suppliers value customers’ money more than their own inventory and time, and customers value suppliers’ goods and services more than their own money. This misalignment of subjective valuation is what motivates trade to happen in the first place. The net result of this is new value creation in the world.
If this were not the case, transactions simply wouldn’t occur. Why would we trade anything for anything else unless we valued the latter more than the former? This is perhaps most clear in barter trades wherein two goods of equal monetary value are exchanged. In such cases, the traders clearly value the other good more than their own, otherwise they would just keep their original thing and forego trading.
In monetary commerce, money is exchanged for goods and services. The physical world doesn’t change, it only gets rearranged. And yet, by the miracle of commerce, the parties to the transaction feel enriched, better off after the trade than they were before. This is as near to magic as anything I know of. (Air conditioning in the Texas summertime being a near second.)
“Oh c’mon,” you say. “Magic? Really?” Yes, really. Think about it. Before you engage in trading, whether in business or in personal life, you are in possession of some goods. If you are selling, you may own widgets you are hoping to sell, or perhaps you possess expertise and the tools required to provide some service to eager recipients of your skills. You own such goods. If you are buying, you own your money.
Enter human desire, that infinite well of creative production that stimulates us to make the world a better place. Sellers desire customers’ money more than the stuff they are selling. Buyers desire the sellers’ stuff more than their money. These desires are subjective, personal, even intimate. Desire is not an objective thing in the physical world; it is a psychological state that motivates human action which in turn transforms the physical world.
This is truly astonishing. Here we have an immaterial reality—human desire—as the principle of action that transforms the material world. Even more amazing is that the end result of commercial transactions is a net increase of the subjective valuation of the world. Every trade makes the world more valuable.
This is an inescapable conclusion of logic. If trading partners value each other’s goods more than their own, then the subjective “market cap” of each trading partner is raised by every commercial transaction. The only reason why we aren’t constantly bowled over with awe about this is that we are so spoiled by the generosity of the market that we take it all for granted.
The ordinary marketplace is really an extraordinary thing, constituted by countless individual transactions motivated by countless personal goals. It is not a “given”, it is a gift, and we ought to reflect and cultivate our sense of gratitude for it.
As it happens, the world has just experienced a tiny hint of life without the market, in the form of the widespread economic shutdown occasioned by the SARS-CoV-2 pandemic. Whatever other lessons we learn from the whole ordeal, we should all agree that a dramatic decrease in our economic lives is a terrible thing to be avoided by all means.
When the dust finally settles, we will (or we ought to) be far more grateful for toilet paper than we ever have before. But this is merely one humorous example of a good we all take for granted. Central air and heating is another. These and a million other goods and services support and enrich our lives every day. These things need not exist—they spring into being through the network of individual transactions that we collectively refer to as “the market”.
So the next time you engage in trade, whether in business or in personal life, reflect a moment on the miracle of commerce and say an emphatic “Thank you” to your trading partner for their contribution to your standard of living. Even more powerfully, next time you are doing your job and have an opportunity to serve a client or colleague, recognize that you are benefitting their standard of living and be thankful for the opportunity to add value to someone else’s life.
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David Smither is a sourcing & procurement leader in the energy sector. A lifelong student and lover of liberty, he writes to promote the culture, economics, and politics of freedom. He studied philosophy at the University of St. Thomas in Houston. He works in Houston for a global manufacturing business, and resides there with his wife and children. To stay up to date with David’s work visit www.DavidASmither.com. This post first appeared at the Foundation for Economic Education.
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