… is from page 117 of my late Nobel-laureate colleague Jim Buchanan’s paper in the October 1987 issue of Ethics, “The Economizing Element in Knight’s Ethical Critique of Capitalist Order,” as this paper is reprinted in Economic Inquiry and Its Logic (2000), which is volume 12 of the Collected Works of James M. Buchanan:
[T]here is no social value scale, as such, established in market exchange. The price vector that does emerge becomes a commonly shared constraint to which all persons adjust independently in their efforts to maximize their own subjectively determined scales of value. It is conceptually meaningless to think of “the economy” as “economizing” on the use of resources. Only individuals “economize,” given their resource endowments and the constraints that they face, constraints that embody the economizing-maximizing behavior of other participants in the whole exchange nexus.
DBx: No obstacle to clear thought about economic activity looms larger than the notion that the economy is an organization with a single hierarchy of ends – ends the achievement of which each of us, as resource owners (including owners of labor services) and as consumers, does or should behave to promote. While the economy no less than the household, the firm, and the government is subject to, and governed by, the basic laws of economics and features of reality, unlike the household, the firm, and the government, the economy is not an organization for satisfying any particular goals. Instead, the economy is that complex of human exchanges – mostly, but not always, mediated with money – that emerges as each individual, each household, each firm, and each government acts in ways to best achieve its individual ends.
An economy ‘works’ to the extent that it enables each of the individuals to achieve as many of his or her ends as possible. But the achieving of these individually chosen ends is not, and ought not be thought of as, itself a means to some higher end such as “national economic growth” or “global economic prosperity.” A nation’s measured economy might indeed grow as a result of individuals achieving many of their individually chosen and pursued ends. And measured global economic prosperity might also rise for the same reason. Yet these happy outcomes are not ends pursued by the millions or billions of individuals each of whom acts in ways that bring about these outcomes. No one intends to bring about these outcomes, and attempts to engineer such aggregate outcomes can only stifle individuals’ abilities to achieve as many of their ends as possible.