The Everyday Wonder of Markets
By David Henderson
On Friday afternoon, I drove from Monterey to a hotel near the San Francisco airport to give a talk the next morning at an event held by the Free to Choose Network. The event was the Winning Ideas Weekend and I was due for a dinner with the participants at 7:00 p.m. I got there at 5:00 p.m. so that I could check in and use the pool before dinner.
But that was not to be. I parked my car and went in to check in. I came out 10 minutes later and my car wouldn’t start. The battery was dead as a doornail. A cabby who was friendly with one of the parking guys offered to boost my battery using cables but it didn’t work. It was now about 5:15 p.m. I pulled out my AAA card and called the 800 number. By 5:50 p.m., Don from AAA showed up and was able to get my car started with a portable battery. He told me that my car would be dead the next morning too and so, when I was ready to leave, to call AAA and ask for battery service. “But then I’ll have the same problem tomorrow morning,” I said. “Do you know a place nearby where I could take my car now to get the battery replaced?”
He pulled out his cell phone and called a local service station. He said, “Follow me.” I pulled out a couple of dollar bills and handed them to him and then followed him in a maze through Burlingame to a service station. He took off and the station owner waved me into the garage. He used a machine to check my battery and confirmed that it was dead. He then priced a new one, installed it, did a voltage check, and recoded my radio. He also explained things clearly as he went.
I paid, for the battery, labor, and the disposal fee for the old battery, about $150. Did he skin me? Relative to normal prices, I don’t think so but I don’t know. But relative to my demand price, no way. I got huge consumer surplus. “You saved my evening,” I told him. I drove back to the hotel, went to my room and changed, and showed up at the conference dining room at 6:55 p.m.
Probably little of the above story surprises you. And that’s my point. We are so used to the everyday wonder of markets that we have little wonder. As Friedrich Hayek said in his classic article, “The Use of Knowledge in Society”:
I have deliberately used the word “marvel” to shock the reader out of the complacency with which we often take the working of this mechanism for granted. I am convinced that if it were the result of deliberate human design, and if the people guided by the price changes understood that their decisions have significance far beyond their immediate aim, this mechanism would have been acclaimed as one of the greatest triumphs of the human mind. (paragraph H.24)