Is The Market Working?
In The Seen, the Unseen, and the Unrealized chapter 1 “The How of the Market,” Bylund tells us to consider the question “Does the market work?” If I were to get asked that question right now I would say yes it does, however in only some circumstances. For example, suppose there is a market run by a singular seller who has significant control over the market. In that case, that leads to monopoly power, which can lead to buyers and sellers having more information than the other party, resulting in market failure.
Going back through centuries these negative views have been due to economic skepticism, and theorists like Malthus, Marx, Keynes, and Piketty. They all shared something in common, their skepticism of markets, seeing issues inherent in or coming from their “value-creating and production-coordinating qualities.” Marx claims
“that there are inherent contradictions in the market system—more specifically, capitalism—such that capitalist competition will “inevitably” lead to crisis” (Bylund, 2016).
In other words, the competitive nature of capitalism will ultimately result in a situation where problems arise due to the fundamental flaws in the system itself. These issues may be economic, social, or political and will arise due to basic tensions within the capitalist system.
The market economy is made up of voluntary exchanges that are considered legitimate by those involved. These exchanges can only be possible when both parties are interested and have something that the other party values more highly, and as a result, they both benefit. There is so much more to the market; it is not simply the exchange of things we already have with others we happen to cross paths. It goes much deeper, it comes down to the law, cost production, approval of consumers, economic cost, and so much more. It is also emphasized that to get into a situation where a certain transaction is possible, one will first need to make other exchanges or engage in production. This is where entrepreneurship comes into play, as entrepreneurs take on the significant risk of producing something that customers will value highly. The significance of understanding the aspect of economic activity, and the uncertainty that comes with production, makes markets extremely complicated. After all, I can see the side of the argument where when it comes to self-interested individuals pursuing their interests ultimately led to benefits for society as a whole. However, I do believe that some exchanges can occur under coercion and that power imbalances between parties may influence others.
The ins & outs of Economics
After reading Chapter 1: What Economics Is. In How to Think About the Economy: A Primer. I learned that we tend to only see and think of the economy in terms of resources, machines, businesses, and jobs. Yet the economy goes far beyond that. We can be misled sometimes by society and go off of whatever someone else says or believe what they make of it, which is why I and maybe a few others have viewed the economy as just those few resources. However, the economy is about “using means to attain ends.” We as human beings have unlimited wants and desires, but resources to satisfy these wants are scarce. This creates the problem of how to allocate resources efficiently to produce goods and services that best satisfy our wants and needs. The economy, therefore, is how we allocate scarce resources among competing uses to maximize our satisfaction.
” Your choice of one thing means you did not and cannot choose the other. By choosing one thing over another, by acting, we rank things’ value to us—we economize. The economy is all of us economizing” ( Bylund, 2022 p. 16).
This quote highlights the importance of understanding opportunity cost and economizing while making individual choices, as well as the role that these concepts play in the overall functioning of the economy. We may better appreciate the complexities and interconnections that drive economic activity if we recognize that the economy is the total of all human choices and behaviors.
A Complex System
After reading chapter 2: Economic Theory. In How to Think About the Economy: A Primer. I got to enhance my knowledge of the phrase “economy is a body of theory.” It implies that economics is not just a collection of facts or observations but a set of concepts, models, and theories that explain how the economy works. In this chapter, Bylund argues that the economy is a complex system that can not be fully understood through simple observation or intuition.
” After all, if you have a dream that you do not act on, you are not making it happen. It remains but a dream. The dream itself makes no difference in the world; merely wishing does not make it real. So, action is a rather logical starting point for studying social reality. Acting is how we make changes to the world.” (Bylund 2022 p. 23)
Economics is not simply about how people value some things and not others. Rather, it can also be related to people’s dreams or fantasies, however only when they are put into action and are putting in the effort to make something happen. This quote stuck out to me and in my point of view, it suggests that action is the starting point for understanding social reality because it is through actions that we make changes to the world. If we are wanting to make a difference, we need to take action and work to bring about the changes we want to see in the world.
Why & How?
In Chapter 4: A Process, Not a Factory in How to Think About the Economy: A Primer. Bylund argues that to understand the economy, one needs to consider it as a process, not as a factory that produces goods. Sometimes we only view our economy as a snapshot that can mislead us into jumping to conclusions about its inefficiency, unfairness, and wrongness. Bylund explains that to understand the economy, it is crucial to recognize the number of steps that go into the production of a good, from the origination of the idea to the delivery of the finished product to the store.
He provides the example of a candy producer and demonstrates how the production of candy involves multiple processes and producers, including sugar and flavoring producers, building and power supply manufacturers, and transport service providers. Bylund mentions that each manufacturer in the supply chain is unaware of the final product’s purpose and is just contributing their part to the process. He suggests that understanding the complexity and coordination of these processes is crucial to understanding the economy as a whole.
Every product that we see in stores is part of a complex supply chain that involves multiple producers and distinct production steps, all working together to deliver the final result. Bylund argues that the economy is more than just the production of goods, but also about the coordination of various processes, businesses, and workers involved in creating and delivering the goods.
Conclusion
I was able to understand the complex world of economics as a whole. These articles have taught me that there is so much more that goes into the production of an item that we see on the shelves of stores. As a society we never really look back on things anymore and think about how something started or why something was produced, and to go along with that we are always expecting more, we are never really satisfied and I believe that our economy will never stop growing so there will probably never be satisfaction with anything. I learned that the market does work in certain circumstances, but it can also fail if monopolies or power imbalances exist. I can now understand that the economy goes way beyond just resources and jobs; it goes more into the resources to maximize our satisfaction. Overall, these chapters have taught the understanding of economics and how it relates to human behavior and decision-making.
References:
Bylund, P. L. (2016). Chapter 1: The How of the Market. In Seen, the unseen, and the unrealized: How regulations affect our everyday lives (p. 1–14). essay, Lexington Books.
Bylund, P. L. (2022). Chapter 1: What Economics Is. In How to Think About the Economy: A Primer (p. 15–20). essay, Mises Institute.
Bylund, P. L. (2022). Chapter 2: Economic Theory. In How to Think About the Economy: A Primer (p. 21–26). essay, Mises Institute.
Bylund, P. L. (2022). Chapter 4: A Process, Not a Factory. In How to Think About the Economy: A Primer (p. 41–50). essay, Mises Institute.