Markets and People in Markets

Tim Worstall, of the Adam Smith Institute’s “Pin Factory” Blog, writes (1 Sept) HERE:

“Similarly low wages for a particular line of work indicates that this particular line of work isn't adding much value. If this line of work were adding great value then wages would be rising in order to encourage more people to enter it and add more of that high value. We would very much prefer that people stopped doing these low value added things and went off to do high value added things instead. Thus, as above, increasing the total amount of value that all in society can then enjoy.”

Comment

Tim Worstall, with whom I am generally in agreement, occasionally in awe, also occasionally causes me to stop in my tracks and frown with a sharp sense of incredulity, has done it again.  Read the sentence below and I shall explain what I mean:

“If this line of work were adding great value then wages would be rising in order to encourage more people to enter it and add more of that high value.”

I can understand someone, say, building a high fence around her property to encourage all but the most determined to stay out of her property (say, it is a dangerous place, or has something of particular value to the owner inside, including her privacy).

That would be a purposeful action on the owner’s behalf, because her action in building the fence is intentional. But is a market able to have intentional actions? 

Markets are inanimate, like carbon atoms, not living entities like humans.  Markets, however defined, are not living entities given to intentions, though people in, or affected by, them are living, intentional, beings.

If wages are high in some sense, the people paying the higher wages may intend something to happen and other people may be attracted to do so, but the generic term ‘markets’ has no feelings, no intentions, no anything.

Markets have no intentions as such. They neither encourage nor discourage specific behaviours. They are not living entities, though some talk of them as if they were. Market failure is therefore human failure.

Humans set, interpret, or ignore price signals and in aggregate these constitute markets and people in them may or may not react to them. The roads to bankruptcy too, are well sign-posted and often willfully ignored.

Signs like “wet paint” can (perversely) encourage people to touch the painted surface, as signs like “keep out” can provoke some people to enter them.  But paint smudges, and trespassers tempted to ignore them (a skull and crossed bones) are the conscious actions of people who ignore them because they don’t believe them.

People in market relationship work by the conscious actions. Markets do not raise or lower prices or wages – the people in them do. Markets don’t have intentions, people in them do.

When I hear people saying things like “the market is always right, never wrong”, I wonder if they realise what nonsense they speak?   “Market” have no opinions; people  have opinions and are as often wrong as right.

The issue is whether there are “better” (not necessarily the “best”) social arrangement for the beneficial happiness of humans than what has emerged from the long emergence of humans in market relationships from millennia ago?  For the majority of the history of the human species, relationships among them have not been market relationships.  The history of non-market relationships were never 

as successful in terms of their successful achievement of above subsistence levels, except for a grotesquely small minority (whose indecent "success" pales into insignificance compared to the products available to the vast majority of modern market relationship societies).  

There are those who fervently believe that there are better arrangements than humans in markets and they usually have their own design  in mind, often requiring a complete re-design right across the political and theological spectrum, from well-meaning utopians to the pathologically psychotic.

Like Tim Worstall, I believe they are profoundly mistaken.