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Quotation of the Day…

… is from page 102 of Matt Ridley’s superb 2015 book, The Evolution of Everything:

No central direction is required to tell the economy how many woollen coats, laptops or cups of coffee are needed.  Indeed, when somebody does try to do so, the result is a miserable mess.  Or North Korea.  Prices, if allowed free to rise or fall, will gravitate under competition towards the cost of production, as demand matches supply.  Suppliers will direct their efforts to the products most valued at any one time, driving down price and satisfying the most intense demand.  The system is run by the decisions of millions of individuals.

Contrary to popular belief, market prices are not arbitrary terms of exchange that determine how wealth is distributed.  Instead, prices reflect underlying realities.  And prices reflect underlying realities in a manner that causes consumers and producers to act consistently with the underlying realities and that cause these underlying realities to change over time in ways that improve human well-being.  Although this analogy is unoriginal, it remains powerful: price and wage ceilings, and price and wage floors, are economic lies that cause economic malfunction in the same way that an artificial restriction on the ability of a thermostat to accurately register the room temperature is a temperature lie that causes the central heating/air-conditioning unit to malfunction.