Evaluating the free market by comparing it to the alternatives (We don't need more regulations, We don't need more price controls, No Socialism in the courtroom, Hey, White House, leave us all alone)
Tuesday, March 24, 2020
Coronavirus economy: Reports of an economic crash have been greatly exaggerated
The economy today lives in suspense, not free-fall. The pandemic will pass. Supply chains will refill. Securities markets will recover, and growth will continue.
"While on spring break from Chapman University, I
am now “confined” by the pandemic to my home in Tucson where I live part
of the year. The fourth of four COVID-19 cases in Pima County
(population just over one million) was announced as I write this — a
haven of safety indeed. But street traffic is heavy, the stores crowded,
and people are busily surfing the empty shelves and buying from the
shelves not yet empty.
Americans are selling
securities and buying toilet paper as Donald Trump urges us all to
socially distance ourselves at least six feet from each other and limit
gatherings to no more than 10. Local stores have announced that oldsters
like me will be allowed to shop their empty shelves for one hour before
regular opening time.
There is a deep economic
lesson hidden in this rush to stock up on ordinary consumer goods,
coordinated spontaneously by common fears of supply shortages and
stock-outs.
Prices guide economy
Why,
throughout almost all our life of economic experiences, do none of us
have the slightest concern that when we go to our local stores,
everything we might desire will be waiting for us on the shelves? We
never think on these things because we have no need or motivation to
think on them. We operate deeply immersed in a world of prices and
available goods and services, and never give it a thought. No central
office, or person, or bureau is in charge. Yet vast supply chains
encircling the globe and, coordinated by people governed by prices
assure that your green tea, buttermilk, canned tuna and toilet paper
will be waiting silently for you whenever you might decide to shop. Each
of us oversees a fragment of this whole, and that is quite enough.
Welcome to the miracle of consumer markets,
requiring only that sellers not falsely represent or advertise their
products and that you must pay for anything you buy. Consequently,
prices constantly adapt and change in response to events near and far
that cause pork prices to fall, or poultry prices to rise. When your
government thought it could improve air quality by mandating that
ethanol be added to gasoline, you didn’t even notice that the price of
tortillas increased, here and in Mexico.
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