The recent political controversies over record oil prices have underscored the sad truth that even nominal friends of the market don’t understand how it really works.
Because they have only a superficial grasp of this complex “organism” and how it coordinates interactions among billions of Homo sapiens spread across the entire planet, they quickly denounce its operations whenever things depart from the ordinary. The market is apparently good enough to be allowed to work when things are monotonous, but (we are told by its fair-weather friends) the politicians need to take the wheel when the road gets bumpy.
In particular, what has happened is that because most commentators — even some professional economists — don’t really have a good intertemporal mental construct of the market, they can’t really fathom how prices would guide people to properly allocate scarce resources. FULL ARTICLE