In “I, Pencil” social coordination can be defined as the process by which different people in a societal setup come together freely with different abilities towards contributing to a common social desirable goal that must be accomplished without which no single individual can accomplish alone. Social coordination is important in human life because human beings are interdependent on each other. This means that, there is no sufficient or complete person who can accomplish success in life alone. This is because different people have different but small know-how, skills or ideas which must be combined with many others to be fully implemented towards achieving the desirable social goal.
The individuals in a market are in pursuit of self-interest as they want to maximize their welfare. These behaviors in the long run serve to be beneficial to the society too as a whole because when the market is left freely, it coordinates automatically due to an invisible force. The political, social and economic aspect should be examined to ensure coordination. The world has changed rapidly due to changes in systems of government, technology and other emerging trends. The market today has employed these ideas of free market and the economy has grown widely.
Malchup places economics as a science because he was the leader of “Ultra Empiricism School of Thought” which suggests that theories in economics can be verified just as science. People believe quantified facts since it can be verified.
The knowledge based on human actions in law, markets, society and politics which affects coordination in complex market economy are important. The problem of knowledge identified is that of economic efficiency and that of economic calculation of knowing the scale values of individuals in the economy since it is complex. Hayek argued that the central planning could not solve the knowledge problem since it only believed that the problem in the economy was technological problem and not allocation problem and thus by applying technological advances, they could only solve one out of many economic problems thus they are not efficient. According to Hayek, the central planning lacked the knowledge to efficiently allocate resources into efficient use, for example, the central production control believed that the production suffers technological problem of which it was not the case but it was an economic problem. In addition, the central planners rejected calculations application in socialism and this contributed to their inefficiency as they were unable to calculate because they lacked price systems in production. On the other hand, the market has proven to be an efficient mechanism because it is in a position to solve both economic and technical efficiency which included proper resource allocation.
The role of prices is communicating the decision-making knowledge to the individuals that helps them when making their choices with the most economized information.
Leonard E. (1998)"I, Pencil: My Family Tree as told to Leonard E. Read 2ndEd. New York: The Foundation for Economics Education, Inc.