MARKETS AND THE LIMITATION OF POWER.
MARKETS AND THE LIMITATION OF POWER. Kids, in the John Kay article that I linked to yesterday, he identifies three elements in the success of markets as compared to centralized systems: (1) allocation of resources through prices; (2) innovation; and (3) diffusing economic and political power. Kay says that points (2) and (3) are relatively neglected. I touched on (2) yesterday. With respect to (3), Kay says that market economies are better at disposing of failed ideas, pointing out that “Honest feedback is not welcome in large bureaucracies.” I will add three related points.First, two (or more) private bureaucracies give a choice. Imagine if you could go to a competing Department of Motor Vehicles (to use the standard example). Second, sometimes inefficient bureaucracies go out of business. Third, a private bureaucracy can be sued for damages.