A friend messaged me on Facebook asking, “If I could build my own economic system, what would it look like?” I responded quickly by letting him know I’d send my thoughts to him the next day. Well, two weeks have gone by and I have finally decided to take a stab at this quite daunting challenge.
For the tl;dr folk, surprise, surprise! It’s capitalism.
To be clear, what is daunting about this challenge is how to effectively communicate the idea that I believe the best economic systems emerge spontaneously on their own, therefore leaving economists with no say in how the economy is set up. Interestingly enough, “the economy” isn’t even a real thing. It’s a term that makes it seem as if the economy is like the motor of a car, a large business, or something tangible that can be manipulated or tweaked in some way or fashion to produce “better outcomes.”
Well, it’s not. What we have are millions (well, billions) of people, constantly pursuing their own, subjective, self-interested ends through interaction and exchange. That’s all.
Here are a couple quotes from some thought leaders in the field:
Peter Boettke writes, “The task of the economist and political economist is never conceived as that of the social engineer in command of the levers of social control in the polity and over the economy.”
Friedrich Hayek’s famous words, “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
James Buchanan argues in a short essay, that “the ‘order’ of the market emerges only from the process of voluntary exchange among the participating individuals. The ‘order’ is, itself, defined as the outcome of the process that generates it. The ‘it,’ the allocation-distribution result, does not, and cannot, exist independently of the trading process. Absent this process, there is and can be no ‘order.’”
The ideal economic system experiment has been tried before, like in North Korea, Cuba, Zimbabwe, and the late Soviet Union. We also know that it is not the easy task it is theorized to be. It’s also important to note that the only way to create the ideal system would be with the use of government—the only entity with exclusive ownership rights to the use of force. So these systems would have to be instilled through coercion. Indeed, the process of creating the pie-in-the-sky economy is off to a rough start. What’s more is that despite the violence needed to create system, the knowledge needed to coordinate the billions of economic transactions, is something that should be left to God, not humans.
I believe the ideal “economy” would be one that is largely left to its own devices, mainly the naturally-emerging price system. Prices are, to my knowledge, the single best way to ration goods and services. They convey the necessary information to consumers and producers on how much to buy or produce, respectively. Additionally, prices are what incentivize entrepreneurs to find profit opportunities that increase the quality of life for everyone.
Rightfully, many economists and policymakers note that markets often fail. However, this is not justification for government or any “all-knowing” person or groups of persons to come in and “fix” them. The fact that markets “fail” should be viewed as a positive attribute. Without the failure of the markets, entrepreneurs would not be able to find different ways to bring value to the world. There would be nothing to do, to create, to pursue.
Capitalism, in its purest form, is the closest I see to the ideal economic system. It is a system that is built on voluntary exchange between humans pursuing their own interests. It is a system that peacefully coordinates transactions between folks of different races, religion, ideologies, and backgrounds. More importantly, I believe it is a system that brings out the best in people. It is often portrayed as an amoral battlefield for the conflict of interests between the poor and the rich. Unethically unrestrained, for the haves to do as they wish to the have-nots. However, this economic, social, and political system is thoroughly structured with ethical norms and inherent laws. Theft, which is ironically pinned as capitalism’s cardinal sin, is rejected entirely. In fact, it is based upon the principle of earning the rewards of value creation and innovation. This principle leads to further ethical implications that undoubtedly furthers the virtues of the human species and advances society.
But what is really neat is the fact that capitalism emerges spontaneously as result of human action, and NOT human design.