Is The Market Working?
In The Seen, the Unseen, and the Unrealized chapter 1 “The How of the Market,” Bylund tells us to consider the question “Does the market work?” If I were to get asked that question right now I would say yes it does, however in only some circumstances. For example, suppose there is a market run by a singular seller who has significant control over the market. In that case, that leads to monopoly power, which can lead to buyers and sellers having more information than the other party, resulting in market failure.
Going back through centuries these negative views have been due to economic skepticism, and theorists like Malthus, Marx, Keynes, and Piketty. They all shared something in common, their skepticism of markets, seeing issues inherent in or coming from their “value-creating and production-coordinating qualities.” Marx claims
“that there are inherent contradictions in the market system—more specifically, capitalism—such that capitalist competition will “inevitably” lead to crisis” (Bylund, 2016).
In other words, the competitive nature of capitalism will ultimately result in a situation where problems arise due to the fundamental flaws in the system itself. These issues may be economic, social, or political and will arise due to basic tensions within the capitalist system.
The market economy is made up of voluntary exchanges that are considered legitimate by those involved. These exchanges can only be possible when both parties are interested and have something that the other party values more highly, and as a result, they both benefit. There is so much more to the market; it is not simply the exchange of things we already have with others we happen to cross paths. It goes much deeper, it comes down to the law, cost production, approval of consumers, economic cost, and so much more. It is also emphasized that to get into a situation where a certain transaction is possible, one will first need to make other exchanges or engage in production. This is where entrepreneurship comes into play, as entrepreneurs take on the significant risk of producing something that customers will value highly. The significance of understanding the aspect of economic activity, and the uncertainty that comes with production, makes markets extremely complicated. After all, I can see the side of the argument where when it comes to self-interested individuals pursuing their interests ultimately led to benefits for society as a whole. However, I do believe that some exchanges can occur under coercion and that power imbalances between parties may influence others.
The ins & outs of Economics
After reading Chapter 1: What Economics Is. In How to Think About the Economy: A Primer. I learned that we tend to only see and think of the economy in terms of resources, machines, businesses, and jobs. Yet the economy goes far beyond that. We can be misled sometimes by society and go off of whatever someone else says or believe what they make of it, which is why I and maybe a few others have viewed the economy as just those few resources. However, the economy is about “using means to attain ends.” We as human beings have unlimited wants and desires, but resources to satisfy these wants are scarce. This creates the problem of how to allocate resources efficiently to produce goods and services that best satisfy our wants and needs. The economy, therefore, is how we allocate scarce resources among competing uses to maximize our satisfaction.
” Your choice of one thing means you did not and cannot choose the other. By choosing one thing over another, by acting, we rank things’ value to us—we economize. The economy is all of us economizing” ( Bylund, 2022 p. 16).
This quote highlights the importance of understanding opportunity cost and economizing while making individual choices, as well as the role that these concepts play in the overall functioning of the economy. We may better appreciate the complexities and interconnections that drive economic activity if we recognize that the economy is the total of all human choices and behaviors.
A Complex System
After reading chapter 2: Economic Theory. In How to Think About the Economy: A Primer. I got to enhance my knowledge of the phrase “economy is a body of theory.” It implies that economics is not just a collection of facts or observations but a set of concepts, models, and theories that explain how the economy works. In this chapter, Bylund argues that the economy is a complex system that can not be fully understood through simple observation or intuition.
” After all, if you have a dream that you do not act on, you are not making it happen. It remains but a dream. The dream itself makes no difference in the world; merely wishing does not make it real. So, action is a rather logical starting point for studying social reality. Acting is how we make changes to the world.” (Bylund 2022 p. 23)
Economics is not simply about how people value some things and not others. Rather, it can also be related to people’s dreams or fantasies, however only when they are put into action and are putting in the effort to make something happen. This quote stuck out to me and in my point of view, it suggests that action is the starting point for understanding social reality because it is through actions that we make changes to the world. If we are wanting to make a difference, we need to take action and work to bring about the changes we want to see in the world.
Why & How?
In Chapter 4: A Process, Not a Factory in How to Think About the Economy: A Primer. Bylund argues that to understand the economy, one needs to consider it as a process, not as a factory that produces goods. Sometimes we only view our economy as a snapshot that can mislead us into jumping to conclusions about its inefficiency, unfairness, and wrongness. Bylund explains that to understand the economy, it is crucial to recognize the number of steps that go into the production of a good, from the origination of the idea to the delivery of the finished product to the store.
He provides the example of a candy producer and demonstrates how the production of candy involves multiple processes and producers, including sugar and flavoring producers, building and power supply manufacturers, and transport service providers. Bylund mentions that each manufacturer in the supply chain is unaware of the final product’s purpose and is just contributing their part to the process. He suggests that understanding the complexity and coordination of these processes is crucial to understanding the economy as a whole.
Every product that we see in stores is part of a complex supply chain that involves multiple producers and distinct production steps, all working together to deliver the final result. Bylund argues that the economy is more than just the production of goods, but also about the coordination of various processes, businesses, and workers involved in creating and delivering the goods.
Conclusion
I was able to understand the complex world of economics as a whole. These articles have taught me that there is so much more that goes into the production of an item that we see on the shelves of stores. As a society we never really look back on things anymore and think about how something started or why something was produced, and to go along with that we are always expecting more, we are never really satisfied and I believe that our economy will never stop growing so there will probably never be satisfaction with anything. I learned that the market does work in certain circumstances, but it can also fail if monopolies or power imbalances exist. I can now understand that the economy goes way beyond just resources and jobs; it goes more into the resources to maximize our satisfaction. Overall, these chapters have taught the understanding of economics and how it relates to human behavior and decision-making.
References:
Bylund, P. L. (2016). Chapter 1: The How of the Market. In Seen, the unseen, and the unrealized: How regulations affect our everyday lives (p. 1–14). essay, Lexington Books.
Bylund, P. L. (2022). Chapter 1: What Economics Is. In How to Think About the Economy: A Primer (p. 15–20). essay, Mises Institute.
Bylund, P. L. (2022). Chapter 2: Economic Theory. In How to Think About the Economy: A Primer (p. 21–26). essay, Mises Institute.
Bylund, P. L. (2022). Chapter 4: A Process, Not a Factory. In How to Think About the Economy: A Primer (p. 41–50). essay, Mises Institute.
Hello @noelanichalmers. I really like how you began your essay with the example of the extent to which the market works. I agree that if one seller was running the entire market, then they would have too much control, but I feel like that would lead other sellers to fail in the market because they would not be able to compete. However, I like your perspective on the market of it not just being exchanges of things we already have, but the other aspects involved, such as the law, costs, and customers. Customers determine whether a product is successful or not, which tells entrepreneurs what they need to focus on to be a leader in the market economy. Bylund discusses this with the term “disruptive technology,” which are new products that customers buy that can replace other products. I agree that entrepreneurs take significant risks because their products can be immediately rejected, and therefore, lose their position in the market. I agree that those who pursue their interests can benefit society because they support the products and services they like, which can begin a trend towards those products or services, leading others to follow suit. But like you mentioned, this power to influence others can ultimately also cause harm because everyone should be able to have a say in the market economy.
From “What Economics Is,” I gathered that economics was more than resources and is about our human interactions. I like when you said that humans have unlimited wants and desires that lack the resources to suffice them. I believe this is what ultimately creates the market economy because that is where entrepreneurs come in and create products to satisfy those needs. However, when we do not have those products, we must decide what we have that can solve the problem at hand. In this chapter, Bylund also discusses the importance of opportunity cost of choosing one product costs the value of the better alternative. We must decide which products are more valuable to us, which keeps the market economy moving by our interactions with resources and each other.
When reading Chapter 2: Economic Theory, I liked how Bylund discusses the fundamentals of economic theory as being our actions that drive the economy. I agree with your thoughts that we must fully understand the economy and not just imply what it is. The quote you used in this follows Bylund’s discussion on actions.
I really love how this quote can express economics, or life in general. If we want anything in life, we must work for it to make it happen. Things do not just come to us without putting in the effort to make the dream a reality. This works for economics though because when we value a product, we work to obtain that product. Entrepreneurs see a need for a new product and service and must work for it because they see value in it. I agree with your perspective that we must make changes to see a difference in the world.
This last chapter of Bylund’s brought the full view of how the economy works and what it is. There are many processes that go into bringing products that we buy to the shelves. Bylund’s example of using the candy producer perfectly explains that we do not just get candy. The candy is made with ingredients by machines, which then have to be transported to distribution to consumers. Understanding that the economy runs on processes is crucial to know because we all play an important role in keeping the flow going. Reading your analysis, I can tell that you understood Bylund’s chapters, and I really enjoyed reading your perspective on the topics. Before I read the chapters, I did not know what the economy was, so understanding that we create the economy is vital information to know so we can continue to improve it.
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Hello @noelanichalmers!
I thoroughly enjoyed your analysis of Per L. Bylund's chapters in his literature. In your analysis of chapter one, "The How of the Market," in his book "The Seen, The Unseen, and the Unrealized," I like how you explained and mentioned the point of how capitalism affects or rather has the potential to cause problems and flaws in the market system. I agree that with capitalism problems and tensions may begin to rise as it can bring about economic, social, or political problems but can also bring on inequality instability issues as well. I also really liked how you mentioned that there is so much more to the market than the typical exchange between people. As I was reading the book, chapter one, I felt that the idea of "exchange" was prioritized a lot in this chapter. It is interesting to see your point of view when you said,
I agree with your statement that the market goes beyond what we know and what the books mentions because when it comes to the market, we also to keep in mind the economy. Looking deeper into these two terms we start getting into the laws, cost production, approval of consumers, economic cost, etc. as you have mentioned in your essay.
In reading chapter one, "What Economics Is," and in the literature, "In How to Think About the Economy," I, too, think the economy is much more than resources, machines, businesses, etc. In what I interpreted from this chapter, is that as humans, we have needs, wants, and desires that we want fulfilled or satisfies, yet cannot always be satisfies due to scarce resources and inability to obtain more. As you have mentioned and as it was mentioned in the literature, it really is about "using means to attain end." But to help satisfy human desires is when entrepreneurs come in to implement and take on businesses and ideas to better help the scarcity of resources as Bylund talks about in this reading.
In chapter two, we can then add on to what economics is by bring in the idea and mention of economic theory as mentioned in this chapter. As humans, the things we value most are ones that we strive to obtain or have already and with that comes effort, action and work. I like how you relate this concept to the world and how in order to see change in the world, we first have to take action because if not action is done, nothing gets done.
Lastly, in chapter four, "A Process, Not a Factory," we can see points point of the economy and how focusing on the aspects it take to get there is more important than the end result. In other words we must focus on the process more than than outcomes. I like that you inserted some remarks from Bylund in this part to prioritize the point that understanding the complexity and coordination of these processes is crucial to understanding the economy as a whole. In the economy, we must remember that the end result is great but if we slow down and take a deeper look into the process in how things are made, why they are made, how they come about, the pricing, etc. then we can fully understand the market and in return the economy as well.