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Quotation of the Day…

… is from page 219 of the late, great Armen Alchian’s famous paper in the June 1950 issue of the Journal of Political Economy, “Uncertainty, Evolution, and Economic Theory“:

Success is discovered by the economic system through a blanketing shotgun process, not by the individual through a converging search.

DBx: By “success” I read Alchian as referring to economic arrangements that make all parties to them better off while simultaneously contributing positively to conditions that enable third parties to make themselves better off. For example, a successful retailing arrangement is one that yields profits to retail-store owners and their employees (that is, to suppliers who contract to work on their employers’ behalf) while simultaneously creating opportunities for economic gain to other suppliers and to consumers.

In this dynamic and uncertainty-ridden real world of ours, where information is scarce and highly dispersed – and in which preferences are subjective and differ across individuals – successful arrangements must be discovered through never-ending competitive processes of trial and error. The notion that ‘the’ best, or even an acceptable, arrangement can be designed in the abstract and then imposed is ludicrous – a fatal conceit.

Sometimes this conceit is on grand display, as when the state undertakes to plan an entire economy. Much more often this conceit is displayed on smaller stages, as when the state attempts to engineer the provision of health-care according to the design of some faux-genius, or – on an even smaller stage – when politicians and policy wonks fancy that they know better than does the market what ‘should’ be the minimum amount of paid leave workers receive, or when it is and isn’t economically appropriate for fellow citizens to purchase goods and services supplied by foreigners.