Flippanarchy

That may be fine in a village or a town or a small chain of towns, but I’m talking about the whole world. The screw-maker lives in China or Vietnam. They don’t speak English or even know which languages are spoken by their customers, yet they make screws used for building houses all over the world.

That’s the miracle of markets. There’s an old saying that “economists know the price of everything and the value of nothing.” It’s absolutely true, of course, but that’s really by design. Economists don’t concern themselves with the deep philosophical questions of human values. They’re mainly interested in answering the question “how much of X should be produced” and the theory of markets says that we don’t really know, but that the information flows through the communication of price information. In the absence of markets, this information needs to be replicated explicitly and the problem turns out to be way too complex.

Think about any manufactured object we use today, in the modern world: a car, a PC, a phone, a microwave, a dishwasher. These objects are made up of dozens to hundreds to thousands and even tens of thousands of parts, many of which are made by hundreds or even thousands of different companies connected together into supply chains that span countries and even continents.

No one at any of these companies actually knows how to do all the work of making everything that goes into the final product. None of them know how many of the parts will be needed in the future. All of them simply respond to changes in prices as they happen in real time, and fulfill orders from their direct customers (who may simply be middlemen).

It’s like a giant jigsaw puzzle with millions of pieces being worked on by many people who don’t even know each other. No one knows what the final picture will look like. Everyone is simply focused on the connections between the pieces in their little corner of the puzzle. Trying to replicate this automatic process with one that’s explicitly designed and fully understood by the designers is extremely hard.

It’s like trying to replace entire forest ecosystems with one where all the plants are carefully planted by hand (like some giant garden). I think we’re smart enough to know we can’t do that without risking a catastrophic collapse.