Nick Cohen identifies the grand and terrible problem these days:
They believe that markets possess more knowledge than the state.
Well, yes, they and we do believe that. And we’re obviously correct to do so.
What is the price of apples? The market price. What should be the price of apples? Well, assuming we don’t want either dearth or glut, the market price. Given that we are using the market to set the price of apples, not government, we are obviously enough assuming that the market knows more about what the price of apples both is and should be than government does.
The basic logic here is not difficult.
It has also been explored in more formal terms. Hayek pointing out that we don’t in fact have any system that knows as much about everything as that market and economy. Government, any form of planner, simply cannot gather the data and cannot process it into information with either the same speed or efficiency. Markets know more than government, have more knowledge.
This is not to say that markets are always the correct management method for everything. Nor is it to insist that there are never market failures, absences of markets, times when markets need central correction. But the bald and basic statement is indeed true - markets know more than governments.
At the most basic level this is because markets, and their prices, are the agglomeration of the knowledge of everyone. Government is only the knowledge of those in government. 7 billion people do indeed know more than the some 600,000 who are the central civil service in the UK.
This is something that a columnist of long standing should grasp at a gut level. The incoming letters and comments do indeed always prove that the readership at large - and in aggregate - know more than the writer on any and every particular subject. Sure, some to many of them will be wrong but there’s not a single one of us who has ever essayed into print without being corrected by the aggregate knowledge of the readership - they knowing more than we.
This is the very same point. The aggregate knowledge of the people out there is greater than that possessed by any subset of us. Even if that subset is called government.