Thursday, May 01, 2008

Markets Do Not Need the Hand of God or Adam Smith's Intentions to Function

The National Post (Toronto, Canada) editorial board on the global rice crisis:

‘It's time to liberalize the world rice market’(30 April) by Marni Soupcoff

Our shops could simply jack up the price of rice and let supply and demand operate the way God and Adam Smith intended, and without question the taggers have been busy with their pricing guns. But managers are willing to forgo a certain amount of extra profit from each bag by limiting the maximum purchase per customer, because it is also in their interest to have more pairs of feet passing through the store. Rationing means you can still have all the rice you want if you're willing to bring enough friends -- friends who just might happen to have their own shopping lists to take care of.”

Supply and demand and markets do not operate the way they do because somebody (Adam Smith) or something (God)'intended' them to do so. They were not designed, invented, or planned.

Their origins are unknowable. Recorded history is but a fraction of pre-history. The actions of humans, and the hominids before them, did not fossilise. The sounds they made dispersed long before their speakers did whatever they were doing. Their apparell, their wooden tools, covers and baskets rotted away within centuries - only their progeny that survived through the hundreds of thousands of generations remain and they know nothing much about those before them because nothing was recorded.

Markets work in known ways. Prices do their job, left alone or regulated, and the more they are left alone the better they do it.

'Rationing' supply is one way of signalling shortages. Hoarding is another. Raising prices is unambiguous, but not instantaneous - the velocity of change is not infinite - but given sufficient time everybody affected gets the message - change consumption patterns, eliminate waste, do without and seek substitutes.


Blogger Tom Moeller said...

Gavin: Here is a local usage of Adam Smith in the Eviro Arena that may interest.
Tom from Texas

8:41 pm  
Blogger Tom Moeller said...

This comment has been removed by the author.

8:44 pm  
Blogger Gavin Kennedy said...

see following post. Thanks Tom

12:48 pm  

Post a Comment

<< Home