Suppose that in, say, the Greater Los Angeles area all of the signs on the freeways and streets suddenly gave false information: highway and freeway exit numbers would be incorrect, directions to streets and cities would be incorrect, everything a jumble of the truth. What would happen? Chaos, most likely, and very quickly, too.
This situation is analogous to what happens to an economy when the government's intervention produces distortions of prices, with consequent distortions of revenues, costs, and profits. Consumers, producers, entrepreneurs, and investors do not know how to get from A to B or even whether B is still a desirable destination. Free-market prices are the sine qua non of a successfully functioning economy. Government interventions replace the truth about consumer valuations and entrepreneurial appraisals with lies and distortions. In view of the pervasive intervention at present, it's a wonder that the current system does not break down entirely.
quarta-feira, dezembro 19, 2012
Preços e sinais
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