Arnold Kling  

The Price System

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Russ Roberts writes


Over the next five or ten years, hundreds of millions of Chinese are expected to leave the Chinese countryside and move to the city. This extraordinary migration will require millions of adjustments to take place to make sure that our lives here in America are not thrown totally out of whack. All those newly-arrived Chinese city dwellers will use more pencils, drink more coffee, buy more bicycles, buy more cars and so on. Will there be enough to go around for those of us outside of China? Surely this expected migration will cause immense disruption. Should we worry about it?

...much of my confidence comes from the evidence of the past 20 years when a hundred million Chinese made the same trek we're talking about in the future. This is the greatest migration in human history and my guess is that you missed it. Very little changed in the world around us. The Chinese didn't buy up all the bicycles or cedar for the pencils or coffee grounds for more coffee. Somehow, our economic system took care of this transition so effectively, that most of us didn't even know it happened.


Recently, I posted about Meir Kohn's distinction between the value paradigm and the exchange paradigm. The value paradigm tends to look at prices as the solution to a mathematical problem of maximizing value. The exchange paradigm looks at prices as a way of handling disequilibrium and change.

For Discussion. Could decentralized market processes take care of issues like the aging of our population and increased demand for health care?


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Randy writes:

Arnold,

The choice in such issues is not between free market and non-free market. Only 50% of the population is employed (up from 30% half a century ago). The question is, how can those who are participants in the free market, support those who are not? The choice is between "family" and "socialism".

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