James d. Gwartney

Video:
Rinkonomics (Spontaneous Order)
Markets are different. Market prices register and tabulate widely fragmented
information. Price information is constantly adjusting to reflect the persistent changes taking
place in the economy. Prices reflect this widely dispersed information and send signals to
business firms and resource suppliers. These price signals provide businesses and resource
owners with the information—and the incentives—required to coordinate their actions and
bring them into harmony with the new conditions. Failure to properly interpret these market
price signals and respond properly will bring losses to the business or individuals.
It is the information communicated through market prices that informs investors, firms,
and workers where their dollars and efforts create the most value for others. Without market
prices for their output, government agencies make decisions without any such parallel measure
of whether they are creating positive net values or wasting resources.
Nobel Laureate Friedrich Hayek summarized the implications of the information
problem confronted by central planners in the following manner:
If man is not to do more harm than good in his efforts to improve the social
order, he will have to learn that in this, as in all other fields where essential
complexity of an organized kind prevails, he cannot acquire the full knowledge
which would make mastery of the events possible. He will therefore have to use
what knowledge he can achieve, not to shape the results as the craftsman
shapes his handiwork, but rather to cultivate growth by providing the
appropriate environment, in the manner in which the gardener does this for his

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plants.
(78)
In other words, the economy is far too complex to be micromanaged. Instead, as
stressed in Part 2, the best strategy for the achievement of growth and prosperity is the
establishment of institutions and long-range policies that will create an environment in which
individuals pursuing their own interest will undertake productive, wealth-creating activities.