Do you enjoy a hot cup of coffee at dawn?
So, how’d that Sumatran coffee get to your grocer? How did the farmer arrange for the beans to be picked up and moved to a warehouse? Who made those big bags he used? Where did they come from? Who figured out how to recognize blight early on and prevent it from damaging his crop? How’d that information get to that farmer on a hillside? Did you know that 90% of the coffee in Sumatra is produced on farms of less than 3 acres? Collectors pick up the coffee after drying and bagging and bring it to large warehouses, perhaps in Sibolga. At a certain point, bankers and insurance agents enter the arena, balancing risk and return. Shippers load and move bags from the warehouses, containers are loaded onto ships, ships are moved, containers are offloaded and trucked, bags are unloaded, coffee is roasted, perhaps blended with beans from Colombia, packaged, and sent to another warehouse for further shipment to your grocer. Amazing! Who arranged all that?
The answer for me to all the questions above is: No! I know none of the specifics. There are all sorts of steps that not only will I never know, even if I tried to understand it all I’d find some details changed even as I looked at them. Someone finds a better way to package beans, or move them or warehouse them, etc. And it moves down through the system, everything gets changed a little, and the coffee arrives a little faster or a little cheaper or with a little more flavor — or all three. And I’ll never know why.
Adam Smith called this “the Invisible Hand,” a continual process of a host of people in any market or industry, that affects every facet of the market. Insurance agents who insure ships: without them, the coffee would cost several times as much, and probably be impossible to find at times. Bankers and underwriters are needed to make money available for everyone from large warehousemen to ship owners to trucking companies to the company actually roasting the coffee beans. Each wants to maximize profits, each competes against others who are doing the same, and in the end, the folks who benefit are, in this case, the folks who drink coffee, whether from Sumatra or Bali or Kenya or Hawaii or Colombia.
And so in every industry.
Here’s the thing: how all these people make decisions and why, on a day-to-day basis can’t possibly be known by any one office or agency or group. This is the key fallacy of central planning, whether attempting to control growing of coffee or corn, or making steel or drilling for oil. Ask the wildcatters out in the Dakotas how much help they received from the government. Remember to bring an ice pack for your jaw.
The other day my brother pointed out that the electronic toll – pass system is a contractual arrangement with private firms bidding to win particular routes from various governments, and the company operating the pass system for a nearby bridge is actually headquartered in Alabama. Further, residents of one state can buy a pass from other states; you can shop around and find the deal that best works for you.
The Invisible Hand hard at work.
What does all this have to do with healthcare?
This past week the President signed an executive order allowing individuals to group together on their own and buy health insurance just as if they were a large corporation or some other organization. And they’re now allowed to shop around, buying “out of state.” The US Government isn’t going to tell them the “right answer,” they get to figure it out themselves, talking to various insurance agents and companies, coming up with a solution that works for them.
The Invisible Hand again.
The truth is no single organization can ever manage to pull all the data from all the various people and processes in a given industry and work out optimal solutions for everyone. In fact, what government traditionally produces is the optimal solution for the government; the people are more or less ancillary to the solution. Letting the Invisible Hand work will, in the end, provide the best possible answer to the most people.
This President seems to recognize that. That’s a good thing.
Enjoy your coffee.
Copyright 2017 Arrias
www.vicsocotra.com