In response to my Apple and Central Planning post Eli Dourado writes

Armen Alchian takes this further in his 1950 article, Uncertainty, Evolution, and Economic Theory. Alchian models the economy as an environment that selects practices for survival on the basis of positive or negative profits. It’s not firms’ motivation that matters; it is results. This evolution-based account is necessarily more dynamic than the profit-maximizing (motivation-driven) model that economists usually adopt.

Which is interesting because this is precisely my view on the firm and almost everyone I mentioned it to has chuckled at it.

Though, I would perhaps take it further and say that ultimately no knowledge, planning, design, information or even intelligence is even necessary for this process to work.

Rather than being a signaling mechanism the price system is a selecting mechanism.

Further, I’ve argued that this is should be our concern with income taxes or at least taxes on capital. Not that they significantly reduce the incentive to accumulate assets, because this seems wildly implausible to me.

Instead, because almost by definition they remove assets from the command of people who – for whatever reason – are successful at accumulating them.

This is also why the predominance of small businesses is a sign of failure not success and so on.

Eli goes on

Framed in this way, we can now ask the important question: Is Apple successful because it was big and centrally directed, or is it big and centrally directed because it was successful? From a Hayek-Alchian perspective, the answer is clearly the latter. Having a Randian hero centrally direct a lot of resources is not, in spite of Apple’s story, a recipe for success. Instead, following a recipe for success will result in a lot of resources to direct.

Here I am not so sure. What is it about being successful that should lead you to being centrally directed? Big, of course. But, why not big and open?

What this is telling us is something about the nature of the evolutionary forces.  To be more specific it could be the case that the market selected for maximum feedback.

Or in more human terms we could say the market rewarded companies that listened to their customers and responded to price signals. In business lore and in my own personal experience I would say this is exactly wrong.

Instead it seems that selection – at least in many cases – favors the ruthless implementation of a singular vision. That is, it selects for minimal feedback.

Indeed, to pick up on Eli’s metaphor – from my readings limited readings – the Randian Hero doesn’t give a hoot about local knowledge, consumer preferences, or even at times profitability itself. He seems not trivially annoyed at being constrained by the laws of physics. Fortunately, Rand supplies him with technological breakthroughs without being burdened with explaining how such breakthroughs are possible.

But I think this furthers the message. The molecular structure of Rearden metal is beside the point. It might as well be forged out of the sheer determination of Hank Rearden himself.

As individualist and pro-capitalist as that story is, it is very much not the story of the market aggregating information in ways that no human or committee of humans ever could. This is the anti-“I Pencil” because you can be damned sure that if there was an iPencil, Steve Jobs would know exactly how it was to be made.

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