Monday, June 8, 2009
Todays lesson from Practical Economics
The idea that consumers are at the mercy of abusive producers is an absurd notion in a market economy. Just as producers have the final say in supply based on consumer demand, consumers have the final say in demand based on what producers have supplied. This cyclical interrelationship between consumers and producers creates a division and separation of power that supports consumer and producer sovereignty (independence).
Consumers, as a whole, determine demand and guide the market. But it is the independence of each individual to freely make economic decisions that creates micro-efficiencies based on specific and specialized knowledge. This is vital because even the greatest minds using the most powerful of computers can only track general trends to forecast future demands.
The strength of a market economy is the exercise of free choice based on personal needs, incentives and wisdom. This creates real-time efficiencies far greater than any collective exercise by even the best of elites with the latest technology. The scale of data necessary to create an efficient economy is incomprehensible to man or machine. Only through a consumer guided market can billions of pieces of information be deciphered and acted upon economically.