It's a Wonderful Loaf
Much of our daily life is the result of plans we make, followed by actions we take. If I want clean dishes, I have to intend to do them and then actually execute that plan using soap, water, and a sponge, or a dishwasher. The same is true of raking the leaves in autumn or shoveling snow in the winter. Or taking a trip to see a friend. Or changing careers. To make these things happen, we have to take charge. If we just sit back and wait for the dishes to climb into the dishwasher, we will wait for a very long time.
Some things in our lives happen on their own without any person’s plan or action. No one has to lean into the curve to keep the earth on its orbit around the sun. I don’t have to remember to breathe when I wake. I don’t have to plan on sweating while I exercise. These things happen naturally without any intention. They are part of our natural world and we take them for granted.
But there is another category in our lives—things that are caused by humans but that aren’t the results of anyone’s intention or plan. The price of housing is higher in Washington, DC than in Wheeling, West Virginia. No one decrees that difference. But if you move from Wheeling to Washington you will find your rent is higher as if it were a law. Wearing shorts and a t-shirt to a funeral is a bad idea even on a hot summer day but who wrote the memo that makes that clear? On weekdays in major cities, people slow down at rush hour though every driver would prefer a different pace. These outcomes emerge from the individual actions of our fellow human beings but no one is in charge to steer them.
A pattern that emerges without coordination is called an emergent order. These bottom-up patterns often look as if they are designed or intended, but they are not.
The variety and availability of bread at decent prices in cities around the world is an example of emergent order. The variety and availability and the pattern of prices emerges from the interactions of the enormous number of people who want to eat bread or bake it, along with the multitude of people who use flour for some other purpose or who are allergic to gluten, or who want trucks to deliver pizza rather than bread and so on. Somehow, the actions of all these people fit together even though no one actor in this economic drama is in control. Day after day, the drama unfolds without a director or a script.
Emergent order doesn’t mean there is anarchy. The government’s legal system and public infrastructure underpin the process that allows the interactions between buyers and sellers to create the order that feeds the citizens of a great city. But there is no bread czar. No minister of flour. No wizard of wheat. Yet, somehow, my desire for rye doesn’t stop you from getting whole wheat. Your desire for whole wheat doesn’t make life hard for the pizza lover. And there is beer made from the same grain to go with the pizza if you want it. The harmony of our daily lives happens without anyone being in control of the overall outcomes.
It would be something of a miracle if such a bottom-up system, undesigned and unplanned by any human hand to achieve the ends it actually achieves, could do anything nearly as well as a system designed from the top down to achieve the same results. Yet something crazier is the case—the bottom-up system often outperforms the top-down system. Of course this isn't a general rule—there are many results where a top-down approach is necessary to achieve a desired outcome. Think of national defense or pollution control for example. But that uncoordinated specialization and cooperation can emerge to satisfy the hunger of millions without centralized control has been a source of wonder going back to at least Adam Smith and his contemporaries.
The economist’s short-hand phrase for this phenomenon of bread being plentiful throughout a populous city is “the market for bread,” represented by a supply and demand diagram. While this representation is inevitably a crude simplification, it can help us understand the ways in which the price and quantity of bread respond to changes in the desires of buyers and the constraints facing sellers. Supply and demand can also help us understand the effects of various government policies—price controls, taxes, subsidies. This blackboard approach to emergent order has the great attractiveness of simplicity. There is much to learn from it. But it fails to capture the full richness of the process.
“It’s a Wonderful Loaf” is my attempt to capture some of what is magical about bread and other examples of emergent order. The following essays, books, videos and podcasts continue that exploration for those who want to go deeper into the idea of emergent order and its application to economics. Many of these resources are embedded in the annotated text of the poem. On this page you can see them all (and a few more), organized by medium. Enjoy.
The ideas in “It’s a Wonderful Loaf” build on ideas from Adam Smith, Frederic Bastiat, and F.A. Hayek. Enjoy their bios and these essays that go deeper into the idea of emergent order.
Enjoy videos and talks that dive into emergent order, the invisible hand, standards of living and more.
A selection of talks that support the economic ideas presented in the poem.
Test your knowledge and go deeper into specific concepts presented throughout the poem.
1. Is bread cheap or expensive? The ingredients for a loaf of bread are only a fraction of the price. Therefore you are better off baking your own bread--you'd save so much money over the course of a year. What is missing from this argument?
2. The beginning of the poem asks the question--who takes care of me and you? What is my answer? Does this answer comfort you or disturb you? Why?
3. When I say “of course the results never perfect, but the system’s organic alive,” what do I have in mind? How does this line relate to the Econ 101 concepts of supply and demand, and equilibrium?
4. People in Athens, Jerusalem, Saigon, Warsaw, as well as New York, London, and Paris live in countries where the government’s role in the economy is very different. The level of taxes and government regulation is different. So is the amount of economic freedom. Yet I’m pretty sure that in all those cities you can find bread every day at a decent price and some pretty good choices of different kinds of bread. Yet that isn’t true right now (in 2017) in Caracas, Venezuela. What are the key ingredients (sorry!) that allow for different kinds of bread to be widely available at a decent price in a big or small city? What does the poem say is the answer? Do you agree?
5. Why is "the freedom to shop where you want" an important key to the process that makes bread plentiful and relatively inexpensive?
6. Is it really such a big deal that your bakery almost always has plenty of bread?
7. If it takes dozens if not thousands of people to create a loaf of bread, why isn't it really expensive? Don't each of those people need a share of the final price paid by the customer?
8. Super Bowl Sunday is the biggest day for pizza sales in the United States, yet pizza makers don't get all the flour. How is that all the other products that use flour--bread, pasta, cookies and so on--are still available that day?
9. Super Bowl Sunday is the biggest day for pizza sales in the United States yet the price of pizza isn't higher that day. The price of other things that use flour are also priced normally. Does this refute the law of supply and demand?
10. Over the course of a year, a particular amount of wheat is grown, a particular amount of flour is produced from that wheat, and that flour gets divided up between all the different products that use flour. Who decides the amount of wheat and flour produced in the Unites States in a year? Who decided how the flour gets shared?
11. I say the supply of bread is big enough "to match up with demand." Is this true? Is there almost always too much supply with bakers throwing away bread or discounting the price because of too much production? Does this mean the process is inefficient?
12. I argue that "over time, fewer people go hungry." Is this true? If it is, is there any relationship between this truth and the forces underlying the production of bread?
13. What does the poem mean when it says: "But somehow their plans fit together with the highest degree of precision." Why is this so impressive? Can't a baker just tell her suppliers what she needs?
14. Walter Williams likes to say that he doesn't tell his grocery store when he's coming, he doesn't tell the store what he plans to buy or how much. But if they don't have it when he gets there, he fires them. What part of the poem captures Williams's point?
15. "The system's organic alive." What does this mean? In what system is the process that bring bread to a bakery organic and alive?
16. In what sense are the participants who create a market for bread anything like a school of fish swimming through the ocean or a flock of geese heading home in the spring? In what sense are they different? Why do I bring those examples?
17. Thinking about the availability of bread (and coffee and garlic and fresh-cut flowers and shirts and sushi and haircuts and inexpensive clothing) might make you grateful. Based on the poem, who should you thank?
18. In textbook microeconomics, perfect competition is often described as requiring a homogeneous product, perfect information on the part of consumers and lots of sellers. Does bread fit this model? Does it matter?
19. “How could he know how much to make of each kind every day?” Couldn’t the minister of bread do a survey of what people want? What would be the challenge of doing a survey and using it to determine how much to make of each kind of bread? How would the process change when people’s preferences change or there is a drought in the midwest that reduces the supply of wheat?
20. Read this article on the rise and fall of sliced, sugar-heavy white bread. Why did the market for white bread shrink? Who made sure that new alternatives came along?
21. The poem reads "You don't have to know economics to know when your money's well-spent." What do you, as a buyer of bread, have to know in order to know if your money's well-spent? How is this knowledge used by consumers to make the market for bread work effectively? How does this work even if the buyer of bread can't answer that question?
22. The poem reads "Competition among all the bakers makes sure that they rise before dawn...to make sure that the buyer's content." What do I mean by competition? How is the way bakers compete similar or different compared to the ways athletes compete in a race or in tennis?
23. Who decides how many kinds of bread are for sale at your local bakery? Who decides the price?