Monday, September 28, 2009

The Spontaneous Order of Markets

In a market economy there is no central planning authority to dictate what goods get produced, how much should be made or who gets what in the end. The production, distribution and consumption of scarce goods and services is determined on the market through the interactions of many buyers and sellers all acting in their own self-interest. Therein lies the fundamental insight in this weeks readings: This complex market system that emerges through these interactions is a product of our collective actions, but not necessarily of our design.

According to Roberts the idea of relating the natural emergence of complex systems to social phenomena like the development of human language or markets dates back to Scottish Enlightenment-era thinkers like Adam Ferguson and Adam Smith and were later elaborated on by F.A. Hayek's writings on "spontaneous order". Although some scholars, namely Murray Rothbard, have noted that this idea pre-dates the Scottish Enlightenment in the writings of Chinese philosopher Zhuangzi who first noted that "Good order results spontaneously when things are let alone".

Regardless of its origins this concept of spontaneous order has also been influential in other fields like evolutionary biology. Richard Dawkins first coined the term "designoid" to describe a complex object or system that looks like the product of intelligent and deliberate design but is actually the result of an unguided natural process, i.e. evolution by natural selection. In this sense free markets can also be thought of as a designoid system.

As a designoid system the market, like evolution, is driven by natural forces. Natural selection is the key mechanism behind evolution, like supply and demand are the key mechanisms behind the market. There's no need for an intelligent designer behind biological phenomenon like natural selection, just as there's no need for a central planner behind economic phenomenon like mutually beneficial exchange.

While it's true that we don't always have to like the way in which these natural forces compel us, for someone to blame the free market because gas, food, health-care or any other commodity is priced higher than what they would prefer seems as futile as blaming natural selection for endowing them with a superfluous vestigial organ.


  1. Richard,

    I like the way you used evolution as an example of the market process. What a great sentence: "As a designoid system, the market, like evolution, is driven by natural forces."

    I was raised in a very religious household that denied the fact of evolution by natural selection. I was taught that all life was designed specifically by an all-powerful, all-loving creator, and that everything was 'working as intended' according to God's plan. I strongly believed that, because that's what my parents taught me. They love me (as far as I can tell) and they have no reason to lie to me about something as important as 'life, the universe, and everything'. (Apologies to Douglas Adams.)

    Then I learned about parasitic wasps. ( I'll be honest with you, the whole market for central planning dropped right through the floor for me. If you don't mind me force feeding a square peg metaphor through a round hole. If you want your children to grow up to believe in Command Economies and/or Command Ecologies, then for Keynes sake keep them away from Parasitic Wasps.

    I guess by Parasitic Wasps, I mean examples of what we would consider to be markets gone wrong. For example, the scene in the "Commanding Heights" video where because of price controls a 'mess o' chickens' gets tossed into a 55 gallon drum to be drowned. Or the possibly true story of the bus factory in Soviet Russia that made buses that were then bused to another factory so they could be cut apart into scrap. (Possibly to be used to make more buses that would then be cut into scrap...)

    I'm kind of digressing a little but it makes me wonder if very religious people, specifically young earth creationists, prefer command economies and Planned Markets (if such a thing is possible) more than they do free markets.

    They love their planned ecologies!

  2. Paradoxically enough most young earth creationists and Christian fundamentalists tend to be very politically conservative and thus skeptical of government intervention in the economy.