The proposition that markets drive economic efficiency is central to much of economics. Adam Smith illustrated that the "invisible hand” of the market drives efficient allocation of resources in a system of division of labor. Friedrich Hayek illustrated the central importance of the price system as an information processing mechanism more powerful than any centrally planned system could ever be. Kenneth Arrow and Gerard Debreu illustrated that complete and perfect markets deliver a Pareto-efficient equilibrium, in which no one person can be made better off without making someone else worse off. And the development of the efficient- market and rational- expectations hypotheses suggested that financial markets are in fact efficient, and that the conditions required for efficiency and for rational and stable equilibria apply even in contracts between the present and the future, which financial markets provide.
Adair Turner, Baron Turner of EcchinswellRelated topics
adam allocation arrow central complete development division drive economics efficiency efficient equilibrium fact future hand hypothesis illustrated importance information invisible labor making market mechanism off perfect person plan present price proposition rational smith stable system worse someone conditions processing hayekRelated quotes
Our presence will serve as an incentive for al Qaeda to grow in numbers and motivate more suicide bombers. An indefinite presence, whether in Iraq, Afghanistan, or Pakistan, will continue to drain our financial resources, undermine our national defense, demoralize our military and exacerbate our financial crisis. All this will be welcomed by Osama Bin Laden, just as he planned it. It's actually more than he had hoped for. [...] The war in Afghanistan and Pakistan will be much bigger, unless the dollar follows the path of the dollar-based world financial system and collapses into runaway inflation. In this case, the laws of economics and the realities of history will prove superior to the madness of maintaining a world empire financed by scraps of paper. Our military prowess, backed by a nuclear arsenal, will not suffice in overcoming the tragedy of a currency crisis. Soviet nukes did not preserve its empire or the communist economy.
Ron Paul
The view has been gaining widespread acceptance that corporate officials and labor leaders have a "social responsibility"... beyond serving the interests of their stockholders or their members. This view shows a fundamental misconception of the character of a free economy. In such an economy there is one and only one social responsibility of business-to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception fraud. Similarly, the "social responsibility" of labor leaders is to serve the interests of the members of their unions. It is the responsibility of the rest of us to establish a framework of law such that an individual... is, to quote Adam Smith... "led by an invisible hand... I have never known much good done by those who affected to trade for the public good."
Milton Friedman
But what would become of mass production and its system of financial expansion if technical perfection, durability, social efficiency, and human satisfaction were the guiding aims. The very conditions for current financial success - constantly expanding production and replacement - works against these ends. To ensure the rapid absorption of its immense productivity, megatechnics resorts to a score of different devices: consumer credit, installment buying, multiple packaging, non-functional designs, meretricious novelties, shoddy materials, defective workmanship, built-in fragility, or forced obsolescence through frequent arbitrary changes of fashion. Without constant enticement and inveiglement by advertising, production would slow down and level off to normal replacement demand. Otherwise many products could reach a plateau of efficient design which would call for only minimal changes from year to year.
Lewis Mumford
In consequence of this arrangement I began to construct the forty-foot telescope about the latter end of 1785. The woodwork of the stand and machines for giving the required motions to the instrument were immediately put in hand. In the whole of the apparatus none but common workmen were employed, for I made drawings of every part of it, by which it was easy to execute the work, as I constantly inspected and directed every person's labor; though sometimes there were not less than forty different workmen employed at the same time. While the stand of the telescope was preparing, I also began the construction of the great mirror, of which I inspected the casting, grinding, and polishing, and the work was in this manner carried on with no other interruption than that occasioned by the removal of all the apparatus and materials from where I then lived, to my present situation at Slough.
William Herschel
... a rather different class of applications of the idea of best allocation of scarce resources... usually referred to as the theory of optimal economic growth. In most studies of this kind made in the countries with market economies there is not an identifiable client to whom the findings are submitted as policy recommendations. Nor is there an obvious choice of objective function, such as cost minimization or profit maximization in the studies addressed to individual enterprises. The field has more of a speculative character. The models studied usually contain only a few highly aggregated variables. One considers alternative objective functions that incorporate or emphasize various strands of ethical, political, or social thought. These objectives are then tried out to see what future paths of the economy they imply under equally simplified assumptions of technology or resource availability.
Tjalling Koopmans
