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Quotation of the Day…

… is from page 546 of Armen Alchian‘s 1977 essay “Summary Notes on Misleading Economic Jargon,” which was published for the first time in The Collected Works of Armen A. Alchian (2006), Volume 1 (“Choice and Cost Under Uncertainty”) (original emphasis):

Ultimately what is considered desirable competition comes down to defining what kinds of actions to advance one’s interests are considered socially acceptable and which are not.  Those that are, are often called competitive, and those that are not, are often called anticompetitive.  In strict language all are competitive.  Two quarterbacks on a football team can compete for that position either by outperforming or by maiming each other.  Both are competitive.  The question is, “which methods are acceptable and which are not?”  That is to be answered after discerning their effects.  And that is what economics is all about – the discerning of the effects of alternative social arrangements or rules.

Note that Alchian says that economics is all about discerning the effects of alternative social arrangements or rules.  (Note also the subtitle, above, of this volume of Alchian’s Collected Works.)  Economics is not about (or cannot successfully be about) discerning the effects of alternative individual actions, or of determining the full range of effects of this particular government intervention in this particular circumstance, or of that particular business activity in that particular circumstance.  Because of our inherently limited knowledge of an inherently (and enormously) complex economy, we can never know whether the consequences of any particular action or government intervention will be on net beneficial or detrimental to society.  The most that we can hope to know is which rules, over a large number of instances through a long span of time, are more likely, compared to other rules, to enable as many people as possible to achieve their ends.

Our inherent inability to know all the relevant details about any particular circumstance should cause us to exercise great restraint before casting aside a rule known to work well in most circumstances in favor of an alternative specific course of action that might appear, in that particular circumstance, to be superior to the course of action prescribed by the rule.  Appearances in such circumstances are far too likely to be mere apparitions.

In short, we humans are too stupid to succeed over time by acting in any ways other than according to well-chosen – or, frequently, luckily stumbled-upon – rules.


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