4 ms·
I think the issue is that the 'nebulous middle-men' actually provide value: they each make decisions based on ambiguous signals, resulting on the whole in bette
by eadmund 6y ago
I think the issue is that the 'nebulous middle-men' actually provide value: they each make decisions based on ambiguous signals, resulting on the whole in better overall decision-making than a central production authority. As an example, a nation mask-making concern doesn't really know how many masks to make. It doesn't really have an accurate count of health-care interactions per day, so it doesn't know how many masks to make in order to provide one per professional-patient interaction. Given the relative political costs to central decisionmakers of a shortage versus a surplus, they will tend to overproduce. This is a kind of socialising costs while privatising profits: society pays for the overproduction both in terms of cost-to-produce and opportunity costs for other items (How many servings of formula for abandoned children is a mask worth? How many prison guards is a mask worth?); meanwhile, the individual decisionmakers enjoy increased social status for insuring supply.
There simply isn't enough information to make good enough decisions centrally. There is waste associated with decentralisation, too (each of those middlemen gets his cut!), but it turns out that there is less waste and more wealth with a free market than with a centralised one.