Wednesday, February 9, 2011

How The Free Market Succeeds - Spontaneous Order

In this article "Passenger Trains: Clearly the Change We've Been Waiting For", John Stossel asks the question: how does Obama know that we need high speed rail? In answering the question he discusses "spontaneous order" or the natural response of the free market to the wants and needs of the people.

This is one of the better articles that I have seen that supports the conservative/libertarian view that the government should get out of the way and let the "spontaneous order" or free enterprise take care of the jobs and deficit problems.

Lawrence Reed, of the Foundation for Economic Education, explains it this way:

"Spontaneous order is what happens when you leave people alone -- when entrepreneurs ... see the desires of people ... and then provide for them.

"They respond to market signals, to prices. Prices tell them what's needed and how urgently and where. And it's infinitely better and more productive than relying on a handful of elites in some distant bureaucracy."

This idea is not intuitive. Good things will happen if we leave people alone? Some of us are stupid -- Obama and his advisers are smart. It's intuitive to think they should make decisions for the wider group.

"No," Reed responded. "In a market society, the bits of information that are needed to make things work -- to result in the production of things that people want -- are interspersed throughout the economy. What brings them together are forces of supply and demand, of changing prices."

"We have this engrained habit of thinking that if somebody plans it, if somebody lays down the law and writes the rules, order will follow," he continued. "And the absence of those things will somehow lead to chaos. But what you often get when you try to enforce mandates and restrictions from a distant bureaucracy is planned chaos, as the great economist Ludwig on Mises once said. We have to rely more upon what emerges spontaneously because it represents individuals' personal tastes and choices, not those of distant politicians."

Read John Stossel's article at here.

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