Capitalism: How Much Is Wasted In Finding Market-based Solutions?


RE: “That represents a huge expenditure of human and physical resources that is not typically looked at when evaluating the efficiency of the winner.”

Actually, it is obvious, common sense, and assumed in economics and politics, but we come to the opposite conclusion.  (a) we are constantly researching and developing new products and services, and variations of them through constant refinements of products, services, and prices called ‘entrepreneurial research and development”. It is not a process of PRODUCTION. The market is a process of RESEARCH AND DEVELOPMENT.

Furthermore, as the world consists of millions of resources, all of which have multiple demands on them, we must constantly look for what we refer to as ‘substitutions’ in the form of different resources, different suppliers, different technology, to adapt to constant changes in the demand for and availability of resources from the most simplistic primary resources to the most complex combination of sophisticated production techniques. 

So. NONE OF IT IS WASTE.   The market is not a machine following a production program. It is a vast network of individuals working in networks some of us call ‘patterns of sustainable specialization and trade”, dynamically changing our efforts in response to other similar networks, in real time on a momentary basis in some cases (oil prices) and on a long term basis in others (commercial construction) and on a very, very long term basis for others (pharmaceutical research.)

It is very common for people who lack knowledge of economics to apply very simplistic concepts of production to an economy. It is very common for people who lack knowledge of economics and to fail to understand prices as an information system by which we coordinate ALL HUMAN ACTIVITY to serve each other’s needs, in a vast division of knowledge and labor, that is incomprehensible to any individual or group of individuals.  It is very common for people who lack knowledge of economics to confuse the difficulty in producing goods and services, as one of applying labor, when labor is, in fact, the cheapest most ready commodity available, and worth very little. On the other hand, it is extremely difficult to ORGANIZE VOLUNTARY participation in production that is not a constant process of producing what is know, but a perpetually dynamic process of organizing the process of research and development, which produces an infinite variety of goods, wherein the competition between multiple producers forces all production to the lowest price, so that an increasing number of people can afford to consume goods. 

Each of us produces very little. None of us, individually, matters to production. However, by voluntarily coordinating our efforts through self interest, by using the information system we call prices to guide us, we can cooperate by in a vast division of incomprehensible knowledge and labor.

For this reason, people who ORGANIZE production are compensated highly for it, but those who CONSUME that production.  Largely, those of us who consume or labor, gain the benefit of our efforts, each of which is very small, in the form of affordable consumer goods and services.  Not necessarily as compensation. Because it is our labor that is of little value, and the organization of labor for the purpose of production as highly valuable. Because risk taking, forecasting, and guessing the future against competitors, so that we make the best use of the world’s resources at any given time, is what determines success or failure of the coordination of many people’s interwoven efforts as successful. And that success is told to us by the information system in the form of ‘profit’.  Profit which is quite hard to obtain it turns out.  That is because, except at the extremes, organizations, whether private or public consume the maximum amount of profit that investors will tolerate. 


It cannot be waste if it is experiment.  The problem with your question is that you assume we know what we do not and cannot know. It may help to remember that the socialists thought like you do and 100 million people are dead because of it. And the entire world has abandoned socialism (central planning of production) for this reason.  Prices and Incentives are inseparable. without prices we literally cannot think, or plan, or coordinate out efforts. Without incentives we cannot voluntarily get people to continue to conduct research and development.  Without research and development we cannot sustain production at low prices, with increasing advancement in technology, goods and services. Without advancement we would eventually become incrementally poorer as all differences between us were equilibrated, and the incentive to cooperate voluntarily declined. 

“I Pencil” (Essay)
“The Use Of Knowledge In Society” (Essay / Hayek)
“Parable Of The Bees” (Essay)
“Economics In One Lesson” (Book / Haslitt)

That’s about it. You get that. You get economics.  We call it The Economic Way of Thinking. 

Curt Doolittle
The Propertarian Institute.

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