"The real power of free
markets: not efficiency, but innovation and dumb luck" is the title of the article published by Rory Sutherland on The Spectator almost a month ago, and
it can be praised for being a true "Hayekian manifesto".
In his note, Sutherland dismisses neo-classical
economics and embraces two of the most polemical statements that can be found
in Friedrich Hayek's works. The first one: competition has little to do with
efficiency. In fact, there are more efficient processes than competition to
allocate resources. Competition must be regarded as a discovery process of new
goods to meet our needs –which some of them remain unknown to us. Competition
could be efficient but in an "artificial way" (as David Hume called
"justice" an "artificial virtue"): since the discovery
process of competition is guided by the tendency for equalisation of the
marginal value of relative scarce resources, the innovations brought about by
the entrepreneur, despite threatening the stability of the economic order in
the short run, stabilise the system in the long run.
The second statement is about meritocracy: again, here
the market contributes to assign results in accordance to merit only in an
"artificial way". Since the payrolls are related to the marginal
contribution of each agent to the productive process, it is highly probable that,
in the short run, we see very lucky people reaping huge unexpected profits,
whereas other activities, more important but less scarce, are poorly
remunerated. Theses processes work as way to equalise relative scarcities in
the long run.
“Innovation”
and “dumb luck” are two devices of the market to stabilise itself. They provide
the economic order with a negative feed back process that allows it to adapt to
the changing environment: new habits and tastes, life expectancy, cultural
shifts, etc., etc., and this stabilisation via adaptation to the changes in the
environment is nothing more and nothing less than evolution.
