Quotation of the Day…

by Don Boudreaux on June 11, 2019

in Complexity & Emergence, Myths and Fallacies, Trade

… is from page 14 of the 1936 English-language edition (translated from German by Alfred Stonier and Frederic Benham) of Gottfried Haberler’s classic 1933 work, The Theory of International Trade With Its Application to Commercial Policy:

One speaks, for short, of ‘British’ exports’ and ‘Germany’s balance of trade.’ But to analyze these conceptions one must split them up into their component parts, i.e., into the actions of individuals.

DBx: Yes.

Trade is not carried out by countries as such. Or by regions. Or by societies. Or by governments (except when they buy and sell, in the same way that private companies buy and sell, each to provision itself as an organization). Trade is carried out only by individuals, each with his or her own distinct preferences (including risk-tolerances) as well as unique knowledge of time, place, and circumstances.

In any society that can reasonably be described as free, the result of the countless on-going decisions by individuals to trade, and of just how to do so in each instance, is a vastly complex yet unplanned (and unplannable) pattern of ‘outcomes.’ This complex pattern can be called, for linguistic convenience, say, “the American economy” or (more accurately) “the global economy.”

But it is not really an economy. The “it” as such – that which we call “the American economy” – serves no purpose in the sense of “it” being aimed to achieve some overall goal toward which each of its component actors is meant, or intends, to promote.

Americans do not work – do not produce, invest, consume, or “allocate resources” – in order to maximize American GDP, to “win” some always-imaginary game of global economic competition against some other country or countries, or to achieve any other aggregate or national goal. And so to attempt to evaluate the American economy according to any such criterion is a fundamental error.

To commit this error is to commit the same error that someone would fall into who, upon observing from a helicopter the flow of traffic along the I-95 corridor near Philadelphia, speaks of “the” purpose of the observed traffic pattern. Each driver has a purpose. And an observer from on high marvels as the orderliness of the pattern’s flow. Further, this observer speaks of “the traffic,” as if it is a thing unto itself. But “the” traffic – being merely a name for a complex and unplanned order that is the result of countess individual decisions – has no purpose. It is not an entity that can possibly possess a purpose.

The ‘traffic’ of human commerce – the human “economy” – has no purpose. “The” [fill-in-this-blank with “American,” “Dutch,” “Chinese,” “global,” you name it] economy is merely a name that we give to a complex, emergent order the operation of which increases the prospects of each purposeful individual better achieving his or her individual goals. But “it” has no goals.


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