The How of the Market
Bylund starts off by discussing “The Market”. He digs into what people define it as and how people perceive its role in society. One really interesting thing that he touched on was Karl Marx’s view on capitalism and the question of what would happen if people were left to their own devices without the control of the market. Bylund argues that humans are naturally good, and that their instinct is to coexist peacefully with those around them. (Bylund, pp. 3) I disagree with this. I personally believe that humans are naturally flawed, self-centered, and evil. I think that we as humans have to learn selflessness, kindness, generosity, and goodness as we grow up. These attributes are not our instincts.
Bylund then switches to the question of “does the economy work”? He talks about how people view this question as easier than the latter question about the market. People hear ‘the market’ and think that it is out of their control, it is all just ebbing and flowing with no influence. On the contrary, people hear ‘the economy’ and generally believe that it is something that they are a part of, and this gives people a sense of control. Bylund stresses the importance of seeing ‘the market’ through the purest lens possible.
“This is the sense in which we will most commonly refer to ‘the market’ here: as unbridled, unhampered, unregulated, and unmanipulated economy.” (Bylund, pp. 7)
So by seeing the market in this way, it does, in fact, become synonymous with the economy. By properly defining these terms and ideas we can better understand their purpose and with this, we can understand what we can do to better it. The reason that the question ‘does the market word’ gets such an emotional response is because this idea has become such a political argument as opposed to an attempt to understand the economy and the effectiveness of its systems.
Bylund discusses the market under the definition of a continual series of exchanges. I like this definition and I think it does a good job at taking the political opinions out of this discussion. Exchanges happen all of the time for all kinds of reasons. One component to keep in mind is that people value things differently. Another thing to keep in mind is that things loose and gain value in people's minds all of the time. I think that this is an interesting thing to think about. I might buy something that is so valuable to me in January, and by March, I see little or no value in it anymore so I ‘exchange it’ in a sense.
With this ever changing scale of value, it is important for entrepreneurs to stay three steps ahead at all times in order to ensure security for their business. As an aspiring entrepreneur, I am definitely thinking about this issue for the future. I will need to determine if the market is optimal or sub-optimal? This is the question, and this is how we answer the above question of “does the market work?”.
How to Think About the Economy
Chapter One
Bylund starts off by defining economics in a very simple and understandable way. He basically says that the economy is defined by human action and interaction. (Bylund, pp. 14) He uses the example of going for a drive or staying home. Once I make the decision to go for a drive, I give up the option to stay home. This was me making a decision or ‘ranking it’ above the alternative option, aka I ‘economized’ it. There is no goal of economics, it just exists. It is simply the combination of everyone's actions and reactions.
The issue with production is that there is no way to regulate the amount of inputs per output or the quality of said outputs. Restating the example in the book, I could use up a certain amount of resources (inputs) to create an output, but it could be generally useless (low quality). On the other side of the coin, someone else could use the exact same resources and create an output that was very useful and high quality.
If we want to be productive economists, we must study the natural ebbs and flows of the economy. I emphasized the word natural because, as humans it is our job just to observe it and go with the flow. I think that on a large scale, there is very little that we as humans can do to change the trajectory of the economy. This being said, in order to be a more productive and useful member of this economy, we must understand how it works and observe it for what it is.
Chapter Two
Although economics cannot be strictly put into a box and / or defined, many scholars and researchers have theorized about economics over the years. Something that is very important about forming a theory is foundational fact. There is no way to build a strong theory if it is not built on a solid and truthful foundation. To start, we need to understand that every human decision is made because there is a supposedly known and favorable outcome. Humans do not just make decisions without some type of attraction to the outcome. The desired outcome can be niche and unrelatable for other people, but it is the desire of the actor that we are looking at now.
Actors make the decisions that they do because they believe that it is the best option to achieve the desired outcome. The fact that they are choosing to take the action now implies that either they lack knowledge or resources needed for this action, or they have tried and failed other actions. The act of choosing this action and believing that it will achieve a particular outcome is the very definition of economizing. This becomes complicated in a business setting. If each person has a different internal ranking of the best options to achieve a certain outcome, there is conflict when trying to decide a course of action.
“Value is subjective” (Bylund, pp. 20)
Not only is value subjective between different individuals, it is also subjective on a case-to-case basis. What this means is that you might value something a certain amount one day, but the next day that value has changed. This can happen for a number of reasons. It could be that your needs aren't the same as they were before, or it could be that you have more of that thing now, so your idea of its value has changed. Now that we know that human actions are always for a purpose and always with an end result in mind, we can better understand how to study the economy.
Chapter Four
There is a lot to know and a lot to understand when it comes to economic processes constantly going on around us. In order to really wrap our heads around everything that there is to know, we must understand one something:
“The economy is not a state but a process.” (Bylund, pp. 35)
The production of seemingly every product that is available to us is a long process. It is a process that requires numerous different production teams to complete. For example, a company that produces backpacks. Chances are that the production company for the backpacks does not produce the zippers, thread, or material used to assemble a backpack. It is highly likely that the backpack producers purchase zippers in bulk from a zipper producer. And the cycle continues on. This goes to show that every process is at the mercy of the preceding process, and so on. This is how the economy works. When all of the processes work together to produce an output, the economy is functioning successfully.
It is important for us to change our view of the economy. Many of us, including myself, look at it as a still picture, or we look at it for what it is at a given instant. Instead, we need to remember that the economy is a process and is constantly changing and evolving. Although we can study the characteristics of the economy and we can know very well what there is to know about the economy, through that process, we will discover that the economy is unpredictable. This being said, there is no way to predict its ebbs and flows. We, as members of society, should be constant students of the economy and have an open mind in the study of its movements.
Sources
Bylund, P. L. (2016). Chapter 1: The How of the Market. In Seen, the unseen, and the unrealized: How regulations affect our everyday lives (pp. 1–14). essay, Lexington Books.
Bylund, P. L. (2022). Chapter 1: What Economics Is. In How to Think About the Economy: A Primer (pp. 15–20). essay, Mises Institute.
Bylund, P. L. (2022). Chapter 2: Economic Theory. In How to Think About the Economy: A Primer (pp. 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 (pp. 41–50). essay, Mises Institute.