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In: Economics

What is the parable of the story of Ramon, Amy and Professor Ruth Lieber? In other...

What is the parable of the story of Ramon, Amy and Professor Ruth Lieber? In other words, what is Russell Roberts’ main thesis? In your answer, you must explain the concept of “emergent order” and describe the role that prices play in creating this emergent order, fully supported by applying supply and demand analysis.

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Expert Solution

                              Ramon, Amy and Professor Ruth Lieber are characters of the story The Price of Everything: A Parable of Possibility and Prosperity written by Russel Robert where he speaks about the economic growth and the unseen forces that creates and sustains the economic harmony around us. In the story, Lieber makes many comments that helps in understanding the concept of how an economy grows and sustains in itself. For example, in the story, he talks about the concept of ‘no one can make a pencil’ where he says that no one will dare to make a pencil for himself/herself. The statement which seems awkward in the first will prove to be right when the economy behind its making is realised.

                                  The manufacturing process of a pencil consists of led, wood etc as the primary raw materials. The led inside the pencil is a compressed graphite which takes another manufacturing entity to process it. The paint, the glue etc are other materials that forms a major part in the manufacturing process of a pencil. Once the economic burden and the cost analysis is done, we can see that production of even this small commodity requires a lot of effort and cost. The process of bulk manufacturing is the thing that makes this process of manufacturing pencils a reality. Thus when the economy behind pencil manufacturing is analysed, it can be seen that the statement made by the professor is correct.

                                    The concept discussed above says about the ‘emergent order’ that prevails in an economy. Emergent order or spontaneous order refers to the concept of self-reorganization of the economy which seemingly is known to be in chaos. It is generally defined as something that takes place as a result of human actions and not as a result of human design. In pure economics and market theory, it speaks about the presence of the ‘invisible hand’ of the economy that helps the market in regaining the order at times of chaos. This unseen force of the free market mechanism was explained by Adam Smith in his ‘Wealth of Nations’. Here, he explains that the unseen forces of supply and demand sustains an economy. He explains that the manufacturing of a produce depends upon the demand it has in the market. Thus, analysis of a market behaviour forms the basis of marketing strategy. In accordance with the demand the market has, products are being manufactured and supplied in to the market and this circular process of demand, manufacturing, marketing and supply goes on in an economy. Thus, an economy finds its way of equilibrium even without the intervention of any external forces. Thus, the story of Ramon, Amy and Professor Lieber are vital to understanding the economic concepts and how an economy functions and sustains by itself.


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