Wednesday, July 6, 2011

Three Popular Expressions I Would Recommend Not Using

Price mechanism - This phrase suggests that the uniform, monetary scale of exchange values expressible in cardinal terms, to which all goods and services can be reduced and which allows for determining the extent to which any given entrepreneur acts in line with consumer sovereignty, is not the outcome of the totality of voluntary choices made by the totality of people wishing to satisfy their wants in a cooperative, contractual manner, but the result of some automatic, deterministically or probabilistically predictable movements and reactions, which can be mechanically constructed or corrected and "scientifically" improved. "Price system" seems to me to be the preferred replacement here.

The game of supply and demand - The word "game" is much abused in the context of discussing market interactions, while being completely inapplicable to it. The everlasting entrepreneurial effort to satisfy consumer wants is no game. "One cannot play speculation and investment. The speculators and investors expose their own wealth, their own destiny. This fact makes them responsible to the consumers, the ultimate bosses of the capitalist economy. If one relieves them of this responsibility, one deprives them of their very character." (Human Action, p. 705)

Spontaneous order - This is probably the most controversial position on this short list. However, I believe that the way in which Hayek imported the term in question from the biological context and used it in his writings generated a fair share of unnecessary confusion. To be more specific, it is suggestive of the notion that the social division of labor, the progressive accumulation of capital, the price system, the legal system protecting property rights, etc., are results of blind, undirected, undesigned evolutionary processes, from which the defining elements of human action are wholly expurgated (I do not claim that this is consistent with Hayek's own thinking on the topic, but this seems to me to be the usual interpretation of it). And yet, while these phenomena are certainly undesigned on the macro level, it cannot be overstressed that on the micro level they are outcomes of the dynamic interaction of innumerably many individual plans and designs of the totality of market participants. Thus, I would recommend dropping the phrase "spontaneous order" in favor of Menger's "organic order" ("organic" as in "of or characterized by the coordination of integral parts").

No comments:

Post a Comment