“Markets are not efficient because we assume they are; they become efficient through a discovery process in which profit and loss guide innovation, reduce inefficiency and generate wealth. This process is what makes markets a better alternative to the state. Implicitly, these critics assume the state can correct market imperfections – ignoring that it suffers from its own limits of knowledge and benevolence. If they judged the state by the same standard they apply to markets, the picture would change: both have flaws, but only one has a built-in mechanism for improvement.”
– Mani Basharzad, writing at CapX on the often dire predictions economists have made, such as their mockery of Argentina’s reforms, or the old claims from the early 1980s that the Thatcher policy mix could not work.
The author of this article has good things to say about the limitations of the neoclassical school in economics, and the failure to understand that competition is a discovery process. Entrepreneurs make money precisely by acting on the basis of incomplete data and in the hope they get things more right than wrong. And when they succeed, or indeed fail, it generates new knowledge. One of the problems for a centrally planned economy is that in epistemological terms, it is barren. A point for those who see AI as creating some sort of fix for socialism to bear in mind.
Don’t do as I do, but do as a thousand others say they do.