Summary
This post is a reflection on readings from The Seen, the Unseen, and the Unrealized by Per Bylund, specifically chapters five, seven, and nine. These readings together formed a unit exploring differnent situations where changes are introduced to the economy and compares them to the unhampered market. It first looks at instances of destruction, and explains that while the destruction is good for the people who make money repairing it, the economy loses value overall. It then explores government regulations, which it compares to damage that is not temporary. Chapter nine then applies these principles to other types of markets and compares them to the "ideal" unhampered market. It is a pretty easy read, and its ideas are explained with a small model society which works through cause and effect in a way that is easy to understand, even with limited understanding of economics.
Reflection
I thought chapter five was really good. This was the chapter that covered destruction in a market, and it was a really easy concept to grasp. "Destruction is bad" seems like such an intuitive concept, but Bylund showed how it could be construed to look like a positive, then countered that idea well. It is really easy to see how the concept behind the value lost in a broken window can be scaled up all the way to bombings and natural disasters. Such events can seem like they bring great economic growth, but it is really just society recovering from great loss of value, and so the perceived growth is misleading.
Chapter seven was a little more difficult to grasp. This one covered regulations in the market, and showed how they influence the market to behave certain ways. I was able to follow how value was diverted from some areas to others, but Bylund then talked about value loss as a result, and I got lost. It seemed to me that all the value was accounted for, and although an arguement can be made as to the justice of an outside influence redistributing value, I failed to see where value was lost in this situation. It is obvious that regulations that are doing their job affect the market and move value away from areas deemed bad or towards areas that are deemed good, but I could not follow how the overall value of the economy dropped. I will grant that regulations may make the market less efficient, but the market is already inefficient as a result of human nature, and it almost seemed like regulation a fine option for the problems suggested. For example, the book suggested that a regulation might seek to solve the problem of soot in the model town from factory furnaces. It then went to talk about how that regulation affected the market. What was left alone was alternative solutions to the soot problem.
I would like to suggest a purpose for regulation I formulated as a result of this reading. It seems that the market is really good at responding to the wants and needs of consumers, and that is what makes the unhampered market effective is its ability to provide for the wants of the consumers. However, this is a very in-the-moment thing. People are not very good at predicting what they will value in the future. The further in the future, the more difficult it is to predict. Though part of the job of entrepreneurs is to predict the values of the consumers, this is always a big risk, and the timing has to be right. Consumers are even worse at predicting their future wants, and even worse at assigning them value. I think that a valid use of regulation would be to predict the future wants of society and prevent certain needs from coming about. Take the soot problem in the book for example. The people in the model society may not have valued the problem of the soot enough to take action to stop it, but some time in the distant future someone might try to sell their house or business, or a new company might decide not to move in because the town is gross. The soot could cause major issues later if it is not taken care of until it is valued enough. The regulation might be a burden on the economy ( I am still not convinced that it leads to a net loss of value), but that burden could be worth it in the long run. I am not suggesting that regulation should be used to attempt to solve all problems before they appear and thus completely control people. However, apply the logic I just used above to a larger scale issue like climate change. People no not value the issue of climate change enough right now to move away from fossil fuels, but if society waits until the problem has gotten "bad enough" the net value lost would be extreme, and could have been prevented by a slight drop in efficiency now. I think that the distance that extreme losses are from the now reveals a blind spot in the unhampered market, and careful regulation could save lots of econmic value in the long term.
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Got curious with the book, adding it to GoodReads for reference :D