Meditate at Lunch

Think for a moment about the last lunch you had. What did you eat? For me it was some pulled pork with barbecue sauce. I made a sandwhich with two pieces of sliced white bread. I also had a golden delicious apple, potato chips, and a glass of milk.

Here is a question. Where did the parts of my lunch come from? The pork and sauce came from a local restaurant. The bread, apple, chips, and milk came from the grocery store. When we purchased the pork or the groceries, we were the buyers. The restaurant or the grocery store were the sellers, who handed the food over. But there's no such thing as a free lunch, right?

In order to take the food, we had to pay money. There at the checkout register, a trade was made. Food flowed from the seller to the buyer and money flowed in the other direction. This is what a market is, a place where buyers and sellers come together and make a trade.

But where did the restaurant get the pork? Probably from a wholesale restaurant food distributor. And notice a subtle shift. The distributor is the seller. Now the restaurant is the buyer. Most people and organizations in the economy play this double role, both buyer and seller. You are a buyer when you are a customer in a store. You are a seller of your labor to your employer. Your organization acts as a buyer through its purchasing department and as a seller through its sales and marketing departments.

In any event, the restaurant buyer and the distributor seller came together and made a trade. The restaurant might have issued a purchase order for a delivery of some number of pounds of pork every few days. After the delivery, the distributor's accounts receivable department sent an invoice to the restaurant. Later, the restaurant's accounts payable department sent a check to the distributor. Buyer and seller came together and made a trade. Food moved from the distributor to the restaurant and money moved the other way.

The wholesale distributor purchased the pork from a processor. Now the distributor was the buyer. In the market, pork moved from the processor to the distributor and money flowed from the distributor to the processor. In a similar way, the processor acted as a buyer and hog farmers acted as sellers.

The pork traveled through a long, complicated supply chain in order to be available in the restaurant when we were ready to purchase it. At every stage in the supply chain, buyers and sellers came together and made a trade. We could describe the same process for the bread that I used to make my sandwich, the apple, the potato chips, and the milk. The food that you ate yesterday and the meals for all the people reading this blog also were delivered by similar supply chains. Same thing for the clothes you are wearing or the computer you are using.

Now comes the miracle of economics, the kind of astounding insight that turned me into an economics jerk. There is no government official or corporate headquarters coordinating all these supply chains and making them work to deliver the products that we want to consume. The supply chains work all by themselves because buyers at each stage are motivated to buy products and sellers are motivated to earn money. This is what the concept of the Invisible Hand is all about.

Imagine for a moment that you are point of light floating in space. Now imagine that the companies from which you purchase goods and services are also floating points of light. Your market trades with them are beams of light connecting you to them. But each of those selling companies also purchase; so, they are connected by beams to many other points of light. Keep going and eventually you can visualize an enormous ball of points of light with many, many beams connecting them in a complicated web.

This connectivity illustrates the Basic Economic Truth: Everything is connected to everything else. So there is something to think about at your next meal. Where did your food come from? What steps did it go through to get to you? How many times did buyers and sellers make a trade? And then tell your friends and family what you're thinking. You'll be an economics jerk!
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COPYRIGHT © 2008 by Robert D. Sandman
ALL RIGHTS RESERVED.