Monday, May 27, 2013

Belief in "Invisible Hands" Spreads to China

Zhao Xu writes in the Economic Observer, weekly Chinese Newspaper HERE
“How the Invisible Hand Guides Traffic”
“The use of a pricing tool enables the market mechanism to play a role through changing the costs. This indirectly guides relevant parties in their behavior with an invisible hand while they still have the right to choose what they do.”
Charging drivers a “Congestion Charge” to take their car, into a city centre that is seriously congested, is an appropriate use of the price mechanism. 
Cars that do not display the appropriate badge and/ or have paid the Congestion Charge, perhaps by number plate-recognition from computer-driven sensors, could automatically be fined heavily. The price to purchase badge and display it is very visible to those who purchase it, and non-display and number plate recognition can be set at a multiple of the congestion badge, with successive increases for multiple offences, including confiscation of the car.
Owners and drivers who enter the congestion zone without paying for authorization to do so know of the consequences, and the level of visible fees and fines can be set accordingly to deter attempts at illegal entry. 
The price system works by visible prices.  There is no need for myths about “invisible hands” miraculously  “guiding” anybody in a price system, let alone drivers.  The proposition is absurd.  Those intelligent adults (including Nobel Prize winners) who believe in an entity they call the “invisible hand” guiding the visible price system are a phenomenon beyond explanation. 


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