Why is the market a spontaneous order?
We can often hear a word-market economy, but what exactly is a market? Few people may be able to explain why the market can bring a huge increase in wealth?
Economics can be said to be a discipline built around the market. Adam Smith discovered the market mechanism. He mainly understood the market from the perspective of labor, division of labor, and exchange; later neoclassical theories, such as Marshall's law of supply and demand, ValLars’ general equilibrium and Pareto’s optimality interpret the market through the equilibrium paradigm; after the Great Depression, Keynesianism discovered market failures, and economists began to study the imbalance and uncertainty of the market; to the new freedomIn the era of socialism, Friedman interprets the market from the perspective of price adjustment mechanisms. Most economists have put forward their own understanding and propositions on the market, but the market theory put forward by the Austrian school should be the most delicate and in-depth essence.
The Austrian school believes that the market is a kind of spontaneous order. The idea of spontaneous order comes from French classical political economy, mainly Bastiat's thought. Why does the "market is a spontaneous order" have the deepest understanding of the essence of the market?Smith, Marshall, and Keynesianism all define the market as a macro system. This view is derived from the Physiocrats’ theory of natural order. However, it is very wrong to define the market as a macro system.Seen as a macro system, people often pay the most attention to the efficiency of the system, and ignore the individuals in the system.
Actually, market transactions are spontaneously formed by individuals, which is a spontaneous order. In the market, individuals always play games and compete with each other; in the market, no individual is special and lacks any one.Individuals, this system can still work; understanding the market as a macro system is a fundamental cognitive bias that will lead to inconsistencies in economic research, and will also greatly mislead people's understanding of the market and economic policies.
For example, we often have this view: When an economic crisis occurs, it is like a person who is critically ill. If the rescue is not done in time, the economy will collapse. Therefore, when an economic crisis occurs, the rescue is a necessary measure. However, ifUnderstanding that the market is a spontaneous order, you will find that the measures to rescue the market are actually wrong. The market is not a living body, but more like a distributed system. When the economic crisis breaks out, a large number of business closures will not affect thisThe existence of the system. When the economy is in recession, a small number of companies make money, and most companies lose money or even go bankrupt, which just makes the market smaller, and does not mean the death of the market. This is the difference between a macro system and a spontaneous order. Leonard· Reid wrote a very interesting story-"I, Pencil", also called "Pencil Story". This story can help us better understand the market.
In "Me, Pencil", Reid uses the first person to describe how the pencil is made. The story is very lively and interesting, showing the entire process of social division of labor, collaboration and market transactions with pencil manufacturing as the coreAlthough it is just a small pencil, it is actually a complicated and huge process from raw material preparation, manufacturing and sales to market. The magic is that this complex and huge trading system is orderly and spontaneous.
There is a passage in the story that expresses this process concisely: "I, the pencil, is a complex combination of various miracles: trees, zinc, copper, graphite, etc., etc. However, the various manifestations of natureIn addition to the miracle, there is a more extraordinary miracle: the aggregation of various creative spirits of man-millions of insignificant practical knowledge, naturally and spontaneously integrated together, so as to respond to human needs and desires, In this process, there is no one to dominate!"
The economist Milton Friedman once quoted Reid's story in his TV special program "Free Choice" to illustrate "the power of the market", especially the adjustment effect of prices. FreehThis is how Deman commented on this article: As far as I know, no other literature is as concise, convincingly and powerfully as this article to clarify Adam Smith’s "invisible hand".The article also clarified the meaning of Friedrich Hayek’s emphasis on the importance of separate knowledge and price systems in disseminating certain information that "will enable individuals to make their own decisions without being told to do this or that.Do what you want".
Text | Chimotosha
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