Thursday, April 13, 2017


In my book and in my class lectures I consistently point out that the state creates the conditions under which wealth is created. The idea that markets and market players, if left alone over time, will operate with machine-like efficiency was inspired by the 19th century's (entirely predictable) embrace of industrial metaphors. 

Unfortunately, the machine-like metaphor is misleading. It's also built around us ignoring some very ugly human realities and, then, embracing some very bad assumptions. There is a very dark side in our free market story, which includes slavery, child labor abuses, and exploitative family wage laws, among others. This dark side was made possible because markets are full of market players who aren't always rational, who are often petty and, worse, who are often driven by less than virtuous forces. This dark side had to be corrected.

Rationality, efficiency, and growth aren't the natural outcomes of market players doing what they want. They're a product of market players being watched and forced to play by the rules.

If we're going to use a metaphor to explain how markets actually function and grow Eric Liu, Citizen University founder, and Nick Hanauer, venture capitalist multi-millionaire, argue we should look to gardens.

Singapore's Garden by the Bay.

Like gardens, healthy and growing markets require great care and constant vigilance. More to the point, as Liu and Hanauer point out, markets are more like a complex ecosystem. In the hands of creative and inspired individuals, well tended gardens can become both productive and beautiful attractions. Conversely, "like any untended garden, an economy left entirely to itself tends towards unhealthy imbalances."

If you find the garden metaphor intriguing, you can read Liu and Hanauer's Evonomics article - "Complexity Economics Shows Us Why Laissez-Faire Economics Always Fails" - by clicking here.

- Mark

1 comment:

Anonymous said...

"The state creates the conditions under which wealth is created."

How could this possibly be true?

How did the first government operate without pre-existing wealth from which to tax to fund its operation?

Are you suggesting that government pre-dates the first instance of capital accumulation?