The Bottom Line: Government shouldn't fix what isn't broken
Dan Clements
Issue date: 4/7/09 Section: Opinion
In response to the current recession and its relative intensity when compared to those of recent decades, many have made the bold suggestion that we should do away completely with the current way of doings things. Many have proposed nationalizing the American banking industry and, recently, protesters at the G-20 Economic Summit have called for the end of capitalism. Such revolutionary actions would be unwise considering it has been innovation in the natural way of doing things that brought us to this crisis. If we chose to drastically alter our current economic system, we run the risk of inflicting even more drastic consequences unto ourselves.
When considering replacing our current system with a newer and purportedly better one, we must first realize that our current economic structure was not planned or forcibly implemented - it evolved slowly over time. Capitalism was not designed; it merely came to be as people followed their own natural incentives. The institutions of our economy were formed through the slow process of trial-and-error. As men experimented with different tools of allocating resources, and after many failures, the ones that were found to work survived and were passed down to us. The makeup of our economy continues to improve itself as newer methods are constantly being tried. Some fail. Those that succeed live on.
The fact that the free market is most efficient at allocating resources, yet does not rely on any grand planning, is a phenomenon which deserves nothing less than awe. Adam Smith first introduced the concept of the "invisible hand" to describe this spontaneous organization. Economist and Nobel Laureate F.A. Hayek discovered that society was far too complex for one person or entity to fully comprehend. Knowledge is dispersed in society among many economic actors, and it would be impossible for any single actor to manage it all. The ability of businessmen to freely set prices allowed the efficient organization of resources. This allowed the synchronization of knowledge and facilitated the voluntary organization of the market.
When considering replacing our current system with a newer and purportedly better one, we must first realize that our current economic structure was not planned or forcibly implemented - it evolved slowly over time. Capitalism was not designed; it merely came to be as people followed their own natural incentives. The institutions of our economy were formed through the slow process of trial-and-error. As men experimented with different tools of allocating resources, and after many failures, the ones that were found to work survived and were passed down to us. The makeup of our economy continues to improve itself as newer methods are constantly being tried. Some fail. Those that succeed live on.
The fact that the free market is most efficient at allocating resources, yet does not rely on any grand planning, is a phenomenon which deserves nothing less than awe. Adam Smith first introduced the concept of the "invisible hand" to describe this spontaneous organization. Economist and Nobel Laureate F.A. Hayek discovered that society was far too complex for one person or entity to fully comprehend. Knowledge is dispersed in society among many economic actors, and it would be impossible for any single actor to manage it all. The ability of businessmen to freely set prices allowed the efficient organization of resources. This allowed the synchronization of knowledge and facilitated the voluntary organization of the market.
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Bitter Bob
posted 4/24/09 @ 12:48 AM EST
I'll get you Bottom Line Dude!!!
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