The Price System

In Part I, two high school students are researching their homework online when they come across a lecture on free market economy given by Nobel Prize winner Milton Friedman. Friedman uses "I, Pencil," a short story by Leonard Read, to explain how a free market economy operates, stating there is nobody in the world who knows how to make a pencil. He explains that thousands of people worldwide manufacture the various components of a pencil. For example, the wood comes from United States, the graphite from South America, rubber from Malaysia, etc. And even though these people do not speak the same language and have very different backgrounds, they are able to cooperate peacefully to produce a pencil. The transaction is voluntary, has no central control and all parties involved are able to benefit.  Part II focuses on the mechanism that makes a free market economy so successful: The Price System. Milton explores how The Price System has enabled the United States to develop. For example, p