The ingenuity of the free market
Most people are not very interested in bidding for luxury goods such as private jets and limited edition cars, nor are they very interested in Musk’s investment in aerospace technology. Under the market system, everyone allocates wealth to the things they subjectively think are the most important, and everyone gets what he deserves. Isn’t it a reasonable arrangement?
Author: GUDORDI | 2024-04-02
One of the most important functions and most ingenious aspects of the free market is to enable society to make effective use of information. (Shutterstock)
There are three classes of people: those who see. Those who see when they are shown. Those who do not see.
──Leonardo da Vinci
In the article “The Subtlety and Complexity of the Market System” , the author mentioned that in the early 1990s, he took a domestic official to visit the trading hall of the Stock Exchange. At that time, he saw that the situation in the hall was chaotic and believed that it could easily lead to fishing in troubled waters. , so it is difficult to understand.
Why is it not a good idea for the government to set guide prices?
Although the “super auctioneer” that this friend understands does not exist at all, and he also understands that traders are working hard to find the theoretical equilibrium price, he still feels unsatisfied and feels that it is up to the government to select some responsible, courageous, and insightful people. People want to learn pricing. Even if they cannot set the best price immediately, as long as they continue to learn and accumulate experience, their pricing ability will only get better and better. Why isn’t this a better solution?
I understood what this official friend meant and the importance of the issue, so I told him a little more. I remember what I said at the time: First of all, it is debatable whether the government can definitely select responsible and knowledgeable officials. Officialdom has its own rules of the game. The promotion of officials often depends on whether they know how to please their superiors and whether the echelon they follow is in power at the time; it may not have a lot to do with their personal abilities and insights. . However, even if every official has a heart like an angel and extraordinary abilities, it does not necessarily mean that it is better for the government to set a price guide.
Ultimately, the real world is limited by insufficient information, and the extent of the deficiency is an important variable. Assuming that the government knows 50% or even more of the information it needs, this friend suggested that it may not be unfeasible for the government to formulate price guidance plans based on the public interest. But if the government only knows 1% of the information it needs, then the situation will be Very different. Even if government capabilities can be continuously improved, the effect is in vain. Most importantly, if we believe FA Hayek, the 1974 Nobel Prize winner in economics, the government may not know even 0.1%.
More importantly, we should understand and understand that one of the most important functions and most ingenious aspects of the free market is to enable society to effectively utilize information. This is the focus of Hayek’s 1945 paper “The Use of Knowledge in Society” – this paper is believed to be the most important explanation of how the economic system works since Adam Smith. One of the documents.
The market is actually the most democratic place
According to Hayek’s view, each market participant can profit from the information they possess, but they are also responsible for the mistakes caused by using the relevant information. From this perspective, participants in the market system are constantly “throwing money” every day, and Hayek should believe that throwing money is actually more effective than voting and can better reflect the will of the voters and their More responsible. From this perspective, the market can actually be regarded as the most democratic place.
More importantly, although there must be an advantage to the philistines and rich people when investing money, in fact it is not a problem as long as the market is large enough. There are currently 8 billion people in the world, and there are hundreds of millions of products on which money can be invested. Even Elon Musk does not necessarily enjoy a greater advantage than the average person. Moreover, in the areas where ordinary people are interested in bidding, they may not be interested in participating. Therefore, no matter how many times his wealth is than ours, if he is “bidding” in the market of egg waffles and bowl wings in Mong Kok, Hong Kong people will definitely be able to do so. “Defeat” Musk. In the market for general products, the rich do not necessarily enjoy much higher advantages than the average person.
Most people are not very interested in bidding for luxury goods such as private jets and limited edition cars, nor are they very interested in Musk’s investment in aerospace technology. Under the market system, everyone allocates wealth to the things they subjectively think are the most important, and everyone gets what he deserves. Isn’t it a reasonable arrangement? Is it really better to have government-led prices than the market?
Back then, Musk had not yet become a public figure, so the author used Li Ka-shing, the richest man in China, as an analogy, but the argument was the same. I believe that with this official’s background and experience, he had never thought of it this way. He may still find it difficult to accept it for a while, so he can only hesitantly respond. I understand this. Just like Leonardo da Vinci’s famous quote quoted at the beginning of this article, there are many things that can only be understood, and those who understand will naturally understand them, otherwise it will be useless no matter how many times they are explained.
