This is an adapted excerpt from a larger work of mine entitled “The Evolution of Free Markets.” Please do enjoy.
Critics of free markets generally (and the super free markets of Austrian economics specifically) tend to be of this type:
1) I cannot think of how A would occur on the free and open market.
2) Therefore A cannot occur on the free and open market.
3) Therefore A must be provided by something extraneous to the free and open market.
Practically every objection you will ever hear against free markets will be of this sort. For instance, my first lecture on “anarcho-capitalism” was mostly criticized as “Well, I can’t see how police protection could be provided on the free market. Since it can’t be provided on the free market, the State is thus necessary in order to provide this.” It is a categorical error lacking all meaning since A can be anything: roads, medicine, defense, you name it. There are hundreds of different versions of this basic formula, but I’m telling you right now, not a single one of them is valid at all as a critique.
It’s exactly akin to me saying “I can’t think of how televisions would occur on the free market, hence televisions can’t occur on the free market, thus televisions must be provided by the government. QED.” And this isn’t a facetious example, I honestly have no idea how televisions could come to be so prevalent within modern society. Think of all the things that need to rise with them in order to make them successful: You need various televisions stations with different programs that people want to watch, these programs require actors and directors and writers, but the shows themselves need advertisers and wardrobe and catered food. The executives need fancy offices and need to draft deals to pump information out through the airwaves and the airwaves need to be interpreted by various intermediate satellites and big receivers and there’s tons of computers and infrastructure and…and that’s just to make the complex product of a TV (with resistors and capacitors and liquid crystal displays and built in DVD players and now they’re all flat and pristine), just the product of the TV work. In fact, I doubt there is a single person in the world who know all the ins and outs of making televisions available on the free market, it’s just too complicated. And yet there are televisions.
The beauty of free markets is that it’s one big collective brain (in a metaphorical sense of course). As I have said previously, the free market is nothing short of the sum total of the voluntary interactions of all consenting individuals. What that means is that no single person or group of people needs to hit upon “the” solution for a problem in the market, simply by taking part within the marketplace, every single person is contributing toward progress. The reason this works is because there is no “correct” solution to the problems of the free market. The free market is an optimizing process, not a perfecting process. The difference being that to optimize something means to do the best you can with what you’ve got. Perfection is a completely foreign concept in the market. There is no ultimate goal that the free market strives for. Rewind the tape of civilization and I can guarantee you that the iPod would never again have been invented. This is much like the evolution of species, go back a hundred million years ago and let evolution run its course again – you would never end up with Homo sapiens ever ever.”
Perhaps I’ll share some of it later, such as the comparison of the Invisible Hand with Natural Selection (they’re actually just different embodiments of the same underlying principle of self-organizing systems), but for now, this’ll have to do.