Real Growth (II.): Entrepreneurs and Discovery

In the second part of the miniseries "Real Growth", we will look at the role of entrepreneurs and the essence of the dispute between the supporters of the state centrally-planned economy and the market economy. It's not about whether to plan or not - it's about who should plan…

Speculation - source: stavebni-formu.cz
Speculation - source: stavebni-formu.cz

Business discovery

The production of things that people demand brings zisk. Someone discovered an oil lamp that was more effective at providing light than candles. It was also cheaper and could attract a wider group of customers - it was possible to make money on it. The initial high profits were the motive for other entrepreneurs to start selling that lamp as well - it was created competition. Competition for customers leads to lower real prices - in order for prices to fall, production needs to be streamlined (this is in the interest of entrepreneurs) - behold, competition logically leads to the expansion of light bulbs, power lines and cheaper electricity!

The lamps had to be made by someone, as had the oil. Someone had to repair them, someone had to sell them. Someone had to make light bulbs, build power lines, repair it, build power plants… By producing things that people demand, we create jobs that are in demand. By producing what people demand, we achieve economic growth.

But how to find out what people want?

Nobody knows what "people" want. Nobody knows what everyone wants, because everyone wants something different every moment. Human knowledge is fragmented among all people. Everyone knows only something, a lot of knowledge is non-verbalizable. The future is unknown, because no one knows how a particular person will behave tomorrow, in a week or in a month.

However, people come into contact and pass on information. Someone bought something from someone, passing the information on. For the transmission of information about human preferences (about what "people demand") is here price systemwhich passes this information across all over the world.

Based on this information, we can plan for the future, estimate trends. Successful planners, trend discoverers, will gain. Unsuccessful not. Who is the "trend discoverer"?

It is businessman, speculator and to some extent every. The employee also estimates future market trends work, he is also an entrepreneur. The competition of planners, which is de facto unlimited in the market system, is thus what makes the market system an effective system - it is not about planning as such. The question is whether the planning should be monopoly (central) or competitive (market).

Competitive vs central planning

In the system of competitive planning, in the market, in capitalism, it is so the extremely important role of loss. Capitalism is not just about profits, but also about losses - loss is the information that our plan is not an effective fulfillment of human needs, that we are wasting precious resources.

Bailouty, which we may have witnessed in the recent past, thus disrupt the functioning of the entire competitive planning system. They have the whole system destructive effects, because the money that good planners have paid in taxes allows bad planners to continue to waste precious resources. It is an element of government monopoly planning, it is a dangerous precedent, it is distortion of competition in planning. The central government planner de facto replaces competition with his own judgment, telling everyone else that "we will pay for you, produce anything." And we are back to the GDP model.

The idols that are de facto behind the crisis. Why?

The mentality of "any production" is behind the belief that if people stop consuming (for example, start saving), this is a problem that needs to be addressed. After all, if people stop consuming, you can't just "produce anything". According to the "philosophy of GDP", a decline is coming and it is necessary (logically) to show people that they are making a mistake - you need to take their money and spend it on them. Logically, it only has the power to intervene in such voluntarily functioning markets state.

But the whole thing is a bit perverted. Why don't people consume? Because they do not produce the things that people demand! The mistake is not in consumers, but in the structure of production, which, due to state interventions, is set to a system of "production of anything" and not to a system of "production of demand". People don't consume because they just don't want to. They will save - by giving impetus to entrepreneurs to start financing the development of new products that will meet consumer preferences.

Thus, all previous "GDP growth" was not real growth - on the contrary. It was a decline and the crisis is the mechanism by which markets (people) try to reverse the trend. It has been a decline since scarce resources have been wasted on producing things that no one wants as a result.

An economical engine?

The attempt to "correct people's actions", ie to spend their money on them, is a logical consequence if we understand GDP (and thus "the production of anything") as a real indicator of growth.

But then comes the question: what is economics?

If I say that the economy is going badly because people do "bad" things in voluntary shifts, I say that there is some "to"Which is an economy and which people mistreat. That there is logically a "repairman" who is to come and that "to", Representing the economy, has repair.

But the economy is the economy, not some "it", some "engine" that can be fixed. And ask yourself: do you need a repairman who can tell you what to do and what not to do? Economics is not a simple machine, some "it" that we can fix - the economy is a living organism composed of us, complex and variable organism. An organism in which it is not so much about the quantitative nature of relationships, it is not even about the "how much", but rather about their qualitative nature. It is more about "who, where, where…". Therefore, if we shrink the quantitative appearance of the whole organism into one aggregate, we will find de facto nothing about the economy as such, because in that aggregate we will not find an explanation of the complex relationships of individuals with each other, we will not find an explanation of that. why the markets look the way they do. The unit will not replace our knowledge of creating every single price.

So what to do?

If we want to achieve real growth, then what is needed?

People need to free their hands so they can plan. Barriers to business need to be removed, the Labor Code (which is unnecessary) relaxed, to get rid of state interventions. It needs to be left working real market prices established by voluntary cooperation.

What we need now is not more state, but less state.

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