Friday, April 03, 2009

The Wonder, Not the Miracle, of Markets

Will Wilkinson, a research fellow at the Cato Institute and editor of Cato Unbound (an organisation I would expect normally to agree with broadly) writes:

Obama's self-immolating capitalism”

“There are two capitalisms. There is mundane market capitalism and there is political capitalism. Markets regulated by the rule of law and governed by a freely functioning price system are post and beam in the architecture of prosperity. You step into a grocery and there in the freezer are your coveted waffles waiting as if someone knew you were coming for them. But no one is looking after your need for breakfast treats. Each looks after her own needs by looking to the free play of prices and there emerges a rough-but-remarkable convergence of the waffles wanted and the waffles supplied. As the great Adam Smith noted, it seems like magic, but it's not. It's just amazing -- in the way the evolution of the eye is amazing
.”

Comment
Where does Will locate his last sentence is ‘noted’ in Smith’s works (as above): ‘As the great Adam Smith noted, it seems like magic, but it's not. It's just amazing -- in the way the evolution of the eye is amazing”?Markets may be amazing, but no miracles, nor magic, are involved (nor were they in the evolution of the eye).

How markets work is explained in Wealth Of Nations without relying on miracles or magic. The great 19th-century French polemicist for markets, Bastiat, dramatized the wonder of markets in providing Paris overnight with the items for its citizens’ breakfast.

We can appreciate the raw beauty of the rainbow without having to believe in miracles or magic. Smith called such outbursts ‘pusillanimous superstition’.

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2 Comments:

Blogger michael webster said...

Go to any island, smaller than Great Britain, and you will find a completely dysfunctional distribution system.

Yet the price mechanism works and the market is free.

It is just a bad market.

Some economists need to get out and look around and see exactly what needs are meet, and what go wanting in various bazaars.

2:23 am  
Blogger Gavin Kennedy said...

Absolutely right Michael.
I like the idea of telling them to 'get out more' - so appropriate.

They could also read John MacMillan's 'Bazaar' book on markets.

6:56 am  

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