Wednesday, October 13, 2004

The wonder of markets

Prof Bourdeaux has a wonderful post about the "magic" of markets: That is, the many marvels of our world – proximately the consequence of technology, ultimately the consequence of free markets and rational thought – are possible only insofar as we no longer really believe in magic.

It reminded me of a deceptively intelligent quote that is tangentially linked by Prof Dave Schmidtz (from Social Welfare and Individual Responsibility): It is easy to ignore the part of the glass that is full. When we ignore it, it does not occur to us what fills it. In turn, it does not occur to us that the things we do to fill the empty part can undermine productive activities that fill the glass in the first place.

Over 150 years ago, Bastiat expressed similar wonder at the power of the market: On coming to Paris for a visit, I said to myself: Here are a million human beings who would all die in a few days if supplies of all sorts did not flow into this great metropolis. It staggers the imagination to try to comprehend the vast multiplicity of objects that must pass through its gates tomorrow, if its inhabitants are to be preserved from the horrors of famine, insurrection, and pillage. And yet all are sleeping peacefully at this moment, without being disturbed for a single instant by the idea of so frightful a prospect. On the other hand, eighty departments have worked today, without cooperative planning or mutual arrangements, to keep Paris supplied. How does each succeeding day manage to bring to this gigantic market just what is necessary - neither too much nor too little? (Economic Sophisms)

There is a real danger that when we become complacent, when we can't be bothered to understand (however roughly) how the world works, we fail to realise that however well intentioned our actions, they may lead to ruin for all. In the West, we have become as wealthy and as healthy as we are now largely due to market activity. When we forget this, and blame market activity for the problems that exist all over the world, we risk undermining our whole society.