Module 5 Essay: Pricing/Production
Blaze K. Munoz
Department of Entrepreneurship, Oklahoma State University
EEE – 2083 Entrepreneurship & Society
Professor Trost
March 21, 2023
Abstract
In this paper, we will be diving deep into the pricing and production process of entrepreneurship, as well as the use of knowledge in society and how we can fix the problems that occur in the economy. In the book, “The Seen, the Unseen, and the Unrealized”, by Per L. Bylund, the author goes into detail about the process of production and pricing, and every step in entrepreneurship all connects one way or another. In addition, the article “The American Economic Review, The Use of Knowledge in Society” by F. A. Hayek, the author touches on the how we can use our knowledge to eliminate problems in the economy.
What Prices Communicate
Pricing/Production
One may think that prices only contribute to goods sold that directly satisfy the consumer, which is correct, but it goes much deeper than that. It is not just buy, sell, trade. Each transaction that occurs in the present also affects the future.
“So, production is not simply the process that is necessary to make a good available, but also the process that makes it possible to demand other goods” (Bylund, 2016, p. 34).
For instance, the government pumps deadly foods to the population which results in health problems, causing us to go to the doctor which gives the government more money. The production of the food leads to other productions such as medicine or health care. Another example may be Apple selling us a phone with a new charging adapter, causing the production of a new charging port.
At the end of the day, producers do not produce because it is fun, or effective, but for the money (Bylund, 2016).
It is rare to find an entrepreneur whose motive is not money. Not saying that it is bad, but as we learned in the last paper, money is not the root of all evil, but rather mankind. In simple terms, everyone who contributes to the economy is an entrepreneur. If you buy, you add value to an object and give money to the producer to produce more. If you sell, you add goods to the economic menu. The economy did not just appear out of no where one day. Producers invested weeks, months, years, in a product to satisfy the customer’s needs. One product leads to another. For instance, one creates clothes and with the money made from selling, they buy furniture, and so on. Every producer and consumer is connected through the process of production. Entrepreneurship is a scary concept because nothing is for certain. One may have an idea of their products’ values, but you truly never know the outcome of a product. There are a lot of different variables that play a factor to some ones product.
Knowledge in Society
Solving Problems
In the article “The American Economic Review, The Use of Knowledge in Society”, by F.A. Hayek, the author tries to examine the problem of our rational economic order. For instance, the problem is not how to receive resources, rather than how to secure the best use of the resources known to society. In other words, how can we use utilizing
“knowledge not given to anyone in its totality” (Hayek, 1945, p. 520).
One may think that this concept is fairly simple; however,
“many of the current disputes with regard both economic theory and economic policy have their common origin in a misconception about the nature of the economic problem of society” (Hayek, 1945, p. 520).
When you look at the economy, everything is planned. A bunch of complex decisions were made about our available resources. For planning to occur, knowledge must be presented. Here, the problem is not who does the planning, but rather if the planning is done correctly. Should one authority have said when it comes to planning or should id be divided among multiple individuals. The problem we face with multiple individuals is everyone has their own kinds of knowledge. However, having multiple sources of knowledge is beneficial due to multiple sources of unique knowledge. Another problem the author faces is given all knowledge to everyone. This article being written in 1945, we now have technology so all knowledge is available to everyone. The author goes on to say that if things progress as expected, there will be no new problems. Wrong. Problems still occur daily, especially in the economic world. A plan is created and changed, it feels like every new day.
Reference
Bylund, P. L. (2016). Chapter 3: What Prices Communicate. In Seen, the unseen, and the unrealized: How regulations affect our everyday lives (pp. 27–45). essay, Lexington Books.
Hayek, F. A. (1945). The Use of Knowledge in Society. American Economic Review, 35(4), 519-30.
I like how clear and concise your essay was. Topics like Apple and the food industry were great additions to your paper, as it shows a clear understanding of what the authors were attempting to outline in their respective books. You did say, however, that
I disagree with this statement, as it is impossible for "everything" to be planned by a higher order. There are certainly human errors present, no matter how large an institution or entity can be. Sure, there is a degree of planning done by those with power, but I do not believe it is as much as people may think -- at least there is minimal evidence to suggest so. Regardless, your comments about the concept of "planning" are on point and you bring a good argument towards the necessity of knowledge in order to be a successful planner. An entrepreneur needs to think ahead, into the future, and take a bet on something they believe will work eventually. The only way someone can do that is if they have knowledge of concepts like human behavior, trends, etc...
Additionally, you mentioned,
I agree with your point, although I do not think that is exactly what the author meant. Hayek was explaining how entrepreneurs solve problems and therefore can mitigate the amount of problems across time. He did not state that we would have absolutely zero problems in the future. Funny enough, the creation of solutions to problems can often cause other problems too. An example of this is medication for an illness. The medication can cure the illness with a high success rate, although can also cause negative side effects. Regardless of that, I am in agreement with you that there will never be "no problems" in the economy. Everything is based on the perception of the individual, therefore it is impossible to satisfy the desires of everyone simultaneously, because we are all unique. By selling a product or service, you can provide someone with value, while also making money to use to provide yourself with some form of value. Value is based on the perception of the individual, so everyone finds value in a verity of things.
Hi Blaze!
I thought that your essay was very informative and straight to the point. You acknowledged what both authors' arguments were covering and gave examples such as the iPhone and deadly foods that are brought to our population making us go to the doctor in order for the government to gain money.
I 110% agree with you. Money is the root of mankind and money has shaped our economy in so many different ways. The whole price production system is a very big process that a lot of people do not see unless shown. Before taking this course I really did not think about the bigger picture behind prices and how we are able to get our hands on things that satisfy our needs. Like you said there is always a benefit or something being added to our economy, no matter if it's a trade or a purchase of a good or service.
Entrepreneurship is really a hit or miss. After watching the movie we were recently assigned Tucker: The Man and His Dream you definitely see a little behind his entrepreneurial background. Although he did have some bumps in the road he never gave up and you mentioned that
Tucker saw the potential of his car even though there were people above him who tried to shut him down. Yet Tucker brought what he said to the table and put in all his time and manpower he could to bring consumers what he promised them. Where I am getting here is that I was not too sure if Tucker was going to make it as a successful entrepreneur, however, he ended up making it as a successful entrepreneur.
I also disagree with Hayek who believes that if things progress as expected, there will be no new problems. As you mentioned economically we are having problems that occur daily. I do not believe that there will ever come a time when there are no problems in our economy. There will always be those who go against or don't believe in such things, causing conflicts between others.
As I mentioned in the beginning, your essay was very straight to the point and informative. Your essay expanded my expertise and view of the articles more than when I first read them.