Words of Wisdom

Government is not reason.  It is not eloquence.  It is force.  Like fire, it is a dangerous servant and a fearsome master.  George Washington

(America needs) a wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate theirown pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. Thomas Jefferson, Inaugural Address

..(By) directing his industry in such a manner as its produce may be of greatest value, (an individual) intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.  Nor is it always the worse for the society that it was no part of it.  By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.   I have never known much good done by those who affected to trade for the public good.  Adam Smith, The Wealth of Nations (Modern Library edition).

Following the successive failures of syndicalism, corporatism, social democracy, socialism, and communism, the market is now accepted on all sides as the fundamentally indispensable way to assemble the dispersed knowledge that enables strangers round the world to rescue one another from poverty and enrich one another by enriching themselves. Arthur Selden, "The Environment, Health and Markets."

At the heart of economics is a scientific mystery:  How is it that the pricing system accomplishes the world's work without anyone being in charge?  Like language, on one invented it.  None of us could have invented it, and its operation depends in no way on anyone's comprehension or understanding of it.  Somehow, it is a product of culture; yet in important ways, the pricing system is what makes culture possible.  Smash it in the command economy and it rises as a Phoenix with a thousand heads, as the command system becomes shot through with bribery, favors, barter and underground exchange.  Indeed, these latter elements may prevent the command system from collapsing.  No law and no police force can stop it, for the police may become as large a part of the problem as of the solution.  The pricing system--How is order produced from freedom of choice?--is a scientific mystery as deep, fundamental, and inspiring as that of the expanding universe or the forces that bind matter.  For to understand it is to understand something about how the human species got from hunting-gathering through the agricultural and industrial revolutions to a state of affluence that allows us to ask questions about the expanding universe, the weak and strong forces that bind particles and the nature of the pricing system, itself.  Vernon L. Smith, "Microeconomic Systems as an Experimental Science," American Economic Review, Dec. 1982

I am convinced that if (the pricing mechanism) were the result of deliberate human design, and if the people guided by the price changes understood that their decisions have significance far beyond their immediate aim, this mechanism would have been acclaimed as one of the greatest triumphs of the human mind.  Its misfortune is the double one that it is not the product of human design and that the people guided by it usually do not know why the are made to do what they do.  Friedrich Hayek, "The Use of Knowledge in Society," American Economic Review, Sept. 1945

Social justice means that we deny ourselves many things so that others may have to do without them too.  Sigmund Freud

(People's) experience in personal social exchange is that doing good (by being trusting and trustworthy) accomplishes good (visible gains from social exchange). In impersonal exchange through markets, the gains from exchange are not part of their experience. ... Interventionist programs, I suggest, result from people inappropriately applying their intuition and experience from personal social exchange to markets, and concluding that it should be possible to intervene and make things better. People use their intuition, not their reason ..., in thinking about markets, and they get it wrong. Vernon L. Smith, Reflections on Human Action after 50 Years, Cato Journal, Fall 1999