A decade ago the anarcho-capitalist economist David Friedman wrote... David Brin and Adam Smith. I commented in 2011, Brin commented in 2014, and Friedman commented a couple days ago. Today I commented...
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Brin's mistake was conflating wealth inequality with collusion. Friedman is correct that Smith didn't say much, if anything, about the former but we all know his famous quote about the latter... "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."
However, Smith also wrote this...
"When by an increase in the effectual demand, the market price of some particular commodity happens to rise a good deal above the natural price, those who employ their stocks in supplying that market are generally careful to conceal this change. If it was commonly known, their great profit would tempt so many new rivals to employ their stocks in the same way, that, the effectual demand being fully supplied, the market price would soon be reduced to the natural price, and perhaps for some time even below it. If the market is at a great distance from the residence of those who supply it, they may sometimes be able to keep the secret for several years together, and may so long enjoy their extraordinary profits without any new rivals. Secrets of this kind, however, it must be acknowledged, can seldom be long kept; and the extraordinary profit can last very little longer than they are kept." - Adam Smith, Wealth of Nations
He wrote several similar passages. Even at least one socialist economist grasped this concept...
"The system of free competition is a rather peculiar one. Its mechanism is one of fooling entrepreneurs. It requires the pursuit of maximum profit in order to function, but it destroys profits when they are actually pursued by a larger number of people." - Oskar Lange, On the Economic Theory of Socialism: Part Two
What's the alternative? For the light to always remain green? No need for yellow or red lights?
The real issue is how we signal value. Are Friedman's numerous blog entries equally valuable? Of course not. Which one is the most valuable? We could answer this question in two ways... 1. voting 2. donating. With voting everybody would have the same say. It would be completely fair. But with donating, wealthier individuals would have far more influence on the rankings. Naturally, voting and donating would provide very different answers to the same exact question. It would behoove us to figure out sooner rather than later which answer is more trustworthy.
