The Market, Part 4 to blupete's Essay
"An Essay On Economics"
Of all human powers operating on the affairs of mankind, none is greater than that of competition. It is the action of endeavouring to gain what another endeavours to gain at the same time. It is the striving of two or more for the same object. It is rivalry. In the words of Henry Clay: "By competition the total amount of the supply is increased, and by increase of the supply a competition in the sale ensues, and this enables the consumer to buy at lower rates. Of all human powers operating on the affairs of mankind, none is greater than that of competition."18
We might readily conceive of a market as a simple affair, as indeed it is in many particular situations as indeed it was when it first started out as one traveling prehistoric group ran across another. Today, the market has developed into a complex of interacting individuals or groups of individuals, as complex as society has become. The complex is supported by a pricing system in market exchange. I again turn to Prof. Hayek:
"We are led ... to do things by circumstances of which we are largely unaware and which produce results that we do not intend. In our economic activities we do not know the needs which we satisfy or the sources of the things which we get. Almost all of us serve people whom we do not know, and even of whose existence we are ignorant, and we in turn constantly live on the services of other people of whom we know nothing. All this is possible because we stand in a great framework of institutions and traditions - economic, legal, and moral - into which we fit ourselves by obeying certain rules of conduct that we never made, and which we have never understood in the sense in which we understand how the things that we manufacture function.The essential function of the market is to rationally allocate existing resources, the very thing collectivitists would do, but only if they could. The politicians, in catering to the squawking ideologues, have wasted our resources and have squandered our opportunities in the pursuit of goals, which, a functioning free market will bring about efficiently and without rancour. Arthur Seldon:
Some persons are so troubled by some effects of the market order that they overlook how unlikely and even wonderful it is to find such an order prevailing in the greater part of the modern world, a world in which we find thousands of millions of people working in a constantly changing environment, providing means of subsistence for others who are mostly unknown to them, and at the same time funding satisfied their own expectations that they themselves will receive goods and services produced by equally unknown people.
What intellectuals steeped in constructivist presuppositions find most objectionable in the market order, in trade, in money and the institutions of finance, is that producers, traders, and financiers are not concerned with concrete needs of known people but with abstract calculation of costs and profit. But they forget, or have not learned, the arguments that we have just rehearsed. Concern for profit is just what makes possible the more effective use of resources."19
"... the four tasks of economic systems everywhere. First, they must develop techniques of valuing scarce resources; second, they must evolve incentives to concentrate on the most productive methods; third, they must devise the means of assembling and distributing information on relative efficiency in alternative employments; fourth, they must create principles of allocating the output to the most urgent or highly valued uses. Yet these are precisely the methods and devices developed by the market.20The market -- and this is the primary point -- is a generator of wealth which does not take away liberty. It is a system, a motor of a free and prosperous society, as Seldon writes, which reflects "individual wants and the popular will, not as an instrument to be used by a dozen or a score or a few hundred men and women with temporary political power."21 The market does not coerce. Unlike group decisions, in a market one never loses his or her vote and thus obliged to put up with the result. If one is not happy with any particular product in the market (whether concrete things or ideas), -- why, then, one can use his or her vote (exchange property such as money) on another product more to his or her liking.
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[Essays, Second Series]
[Essays, Third Series]
[Essays, Fourth Series]