Silence golden for market economy
One of the market economy’s greatest flaws is the silence it maintains when it is working relatively flawlessly. When the market stumbles, though — or when it’s tripped up by unwise government interventions — a great clamor is heard. Unemployment rises, stock prices and exchange rates plummet, and tales abound of this hardship and that lost dream. Pundits proclaim loudly that the unreliable market must be “corrected” or “tamed” by the wisdom and prudence of politicians.
But when the market works smoothly — as it typically does — hardly anyone notices. We take its successes for granted.
That’s the thing about a steady stream of relatively small, almost daily improvements in our standard of living. We acclimate to them.
Recall the first time you saw someone unlock or lock an automobile by using a remote-keyless-entry device. When I first saw someone point a plastic nodule at his car to unlock it from a distance, I marveled. “One day I’ll earn enough money to drive a car with that feature!” I told myself.
That was 1994. I do indeed now drive a car with keyless entry. And so do most Americans. Keyless entry is standard on even low-end automobiles today. Seeing someone unlock or lock a car using a keyless-entry device is as remarkable to us now as seeing a pigeon in Central Park. It’s just part of our world.
Yet who invented this device? Do you know? Even if you do know the names of the people whose creativity was key (!) to this invention, those people are likely complete strangers to you. And yet those strangers pondered and experimented and spent time on efforts that resulted in affordable and reliable keyless-entry systems that benefit you .
Why did they perform these tasks? What mechanisms and institutions bring together all the workers, materials and financing required for the continual production (and improvement) of these handy little devices?
The answer is “the market.”
The market is a vast and complex pattern of voluntary choices and exchanges — including the taking of financial risks — that emerge when each individual is free to produce, to sell and to buy according to his or her own individual lights. The only constraints upon such exchanges are the rules of private property and of freedom of contract. If I want your pet frog or your productive factory, I can get it only if I agree to give you something that you voluntarily accept in exchange.
Unlike in politics, market participants do not confiscate the property of others. Unlike in politics, where those with the most votes get to take unilaterally from those with the fewest votes, in markets, even those with the most money are prevented from unilaterally taking even from those with the least money.
Therefore, the incentives that the market provides to us to improve our lives by finding ways to also improve the lives of strangers help to tie us all together into what economist F.A. Hayek called “an extended order.” This order is a global network of cooperation that keeps us well-fed, well-housed, well-clothed — indeed, well-everythinged — compared with people in noncapitalist societies. Yet it works so smoothly and silently that we, sadly, take it for granted.
Donald J. Boudreaux is a professor of economics at George Mason University in Fairfax, Va. His column appears twice monthly.