From single massive mainframe computers (e.g., IBM 360/370, Multics) to networks of “minicomputers” (e.g., Digital Equipment, Wang Labs, Honeywell) to hordes of standalone Personal Computers, and now tablets, smartphones, and “the Cloud,” compute power has gone from expensive and centralized to cheaper and distributed. No one that I know of has said that this has been a bad thing. Sure, the “compute marketplaces” underwent tremendous upheaval both on an economic scale, death for many companies, and careers impacted (mine certainly was), but compute power went from the “High Priesthoods” to “common man” (or child) availability.
Power distributed is better – not a monoculture but a diverse landscape that caters to all kinds of niches, needs, and applications.
But there are those that, having SEEN all this over the last 70 years, refuse to see the analogy for economics in general from centralized control by Monarchies to the rise of capitalism to the masses. “Spontaneous Order” is the ordering of the economy not by a very few but by millions upon millions of people simply making economic decisions for their singular self-interest. For themselves and not at the behest of “those at the top” that think they know everything needed to make those decisions for others. That’s a mainframe-centric 1950s thinking in the age of smartphones that have more power than back then, but it still exists. So what got me started on this rant, where the Socialists/Communists Totalitarians in the Biden Administration are taking more and more economic control over us?
Markets enable people to coordinate their activities so that individuals can make use of the knowledge of others without having that knowledge themselves. -Randy Holcombe
Unlike the power-hungry bureaucrats (who yearn for such control mainly because they have realized that the Executive Branch has become so expansive they only have to reach down and pick up that Power), Normal people don’t coordinate. They don’t gather in homes, in bars, or at clubs and decide how they will instruct how things will run. Instead, the coordination of a Free Market comes down to one datum: Price Point. While economic totalitarians hate the idea that people can and should choose for themselves, it is the vehicle by which many decisions can be made, the chief of which is “Can I afford it?”. “DO I want to ‘stretch’ to afford it?”, what is the ‘quality’ of that item at that price?” and “Will it perform (product specifications, quality-wise) as I need it to?”.
And each of us can play that role for ourselves as we also are immersed in our “scarcity” atmosphere – what is the tradeoff that I will pay if I purchase this over purchasing this other thing (as few of us can almost totally disregard that issue like Elon Musk can)?
Prof. Don Boudreaux speaks more to this on the famous example of “I, Pencil” – we can’t know enough individually to make all those things that make our standard of living what it is today BECAUSE of Capitalism, its underlying philosophy – and its “distributed knowledge that no top-down committee(s) could ever know:
This truth, alas, is ignored, or insufficiently appreciated, by nearly everyone outside of a tiny band of economists and classical liberals. Yet one glance at everyday reality in modernity makes this truth impossible to deny.
Consider, for example, the device on which you’re now reading my words. Even if you’re a renowned computer scientist or a genius software engineer, you have no idea how to make any of the vast majority of the components of your device. You don’t know how to make the glass that is the screen, the plastic or metal that forms the casing, the tiny lens of the tiny camera that’s in that device, the electricity-generating and transmitting processes without which that device would be useless. Yet each of these myriad different things exist. Each exists because a few individuals have the specific knowledge necessary to produce it, without any of these individuals – or you – having anything close to the knowledge necessary to produce the entire device.
The millions of different individuals each with his or her own specific knowledge must have their productive efforts coordinated with each other if the final results are to be useful – are to have value. This coordination is achieved by each person being guided by market signals – that is, by prices of outputs, prices of inputs, asset values, and profits and losses.
Simply, Price Points. Everything needed to design, market, sell, and support “a widget” can be summed up in a single data point.
Advocates of industrial policy wish either to censor or to ignore the knowledge conveyed in markets. But the only ‘knowledge’ that they have to replace that which they censor or ignore comes from their hunches and personal preferences. Industrial-policy advocates simply assume that, if they can imagine some economic outcome, then the government can directly allocate resources to achieve that outcome and do so in ways that improve the well-being of ordinary people. The particular imagined outcomes, depending on what they are, might be achievable. What is not achievable, save by pure and highly unlikely chance, is the attainment of these outcomes in ways that are not excessively costly – that is, in ways that improve the well-being of ordinary people.
I bring up the apocryphal story of the Soviet Russian store that only had left shoes without the right shoe pair. Oops – the story of incomplete knowledge in a command and control economy.
The least advantaged in market societies are better off than the least advantaged in nonmarket societies and may be better off than the most well-off in some nonmarket societies. This material fact, we argue, is of moral significance
Oh, that Thomas Sowell quote? Yes, capitalism is concerned with serving others with goods and services that people ACTUALLY WANT.
(H/T: Cafe Hayek)
