Sunday, November 25, 2012

The Best Economic Illustration Ever

We do not live in a "free market" society. We live under a crony system of rent-seekers. John Kay succinctly explains:

The fall of the Berlin Wall was the symbol of the most important economic development of our lifetimes, opening the way to the creation of market economies not just in the former communist states but in countries such as India with great unrealised economic potential.

Yet many misunderstood the lesson of the failure of centrally directed economic systems. Market economies succeed when they advance through disciplined pluralism – the process that gives maximum scope for experiment and innovation, while ensuring that when experiments and innovations fail they are terminated, and that when occasionally they succeed they are imitated. That is the origin of the advances in the IT sector.

The success of market economies is not achieved by policies that encourage people to be greedy and imposing as few restrictions as possible on what the greediest of them do. That was the world of Shah Jahan and it produced very little in the way of economic advance.

Read it all here.

2 comments:

The Underground Pewster said...

The link didn't work. Here is a new one.
http://www.johnkay.com/2012/11/21/the-monumental-folly-of-rent-seeking

The Underground Pewster said...

Rent seeking can build great tourist attractions however. The Taj, the Sistine chapel, etc...