Bruce Caldwell wrote: "For me, the phrase "the
unintended consequence of intentional human action"
captures the sorts of thing that Hayek meant by
spontaneous order. In the market order, people just do
their jobs, they have what Paul Seabright called
"tunnel vision" - they don't see what role they play
in the larger order. No one person decides to feed
Paris; but Paris gets fed, ..."
Commentary:
If a day came when our historical scholars would see
brightly, they would smile and say: Oh well, EVERY ONE
PERSON in Paris decides to EAT food and adequately PAY
for it, in direct consequence of which others would
rush to SELL food to them for PROFIT.
Students would remember someone named Bohm-Bawerk and
a concept called roundabout production. They would
know that the event called "feeding Paris" does not
occur at all, but the event called "Parisians eating"
does occur. Before Parisians decide to eat and pay for
the food that they wish to eat, no event called
"feeding Paris" can possibly occur.
In fact "feeding Paris" is neither intended nor
performed: the suppliers of food do not feed Paris at
all- they merely earn PROFITS by SELLING food. Their
intention is to earn the profit, and not to feed
Paris.
Leontief provided the analytical device to understand
the matter under brighter light. To see brightly, one
will have to identify a variable subject to precise
measurement, and then link it to another variable in
some causal frame. Leontief makes it absolutely clear
through an input-output relation. So a student will
see the quantity of food the sellers bring to Paris as
a dependent variable,
where the amount of profit from food sales is the
independent variable. The student will never waste
time looking for intentions behind a consequence (such
as feeding Paris) that does not happen at all. The
student will next find the buyers of food, who most
surely intend to eat the food. Here, the quantity of
food bought will be the dependent variable, linked to
the utility of food consumption (benevolence in Adam
Smith's lingo) as the independent variable.
The people of Paris cannot eat food merely by wishing
to eat: they must pay for it. Then the utility of food
consumption is not the final output; food is an input
into the production of the means of
payment the Parisian produces. In physical imagery,
the food the Parisian consumes is an input to the
Parisian goods he produces and delivers to the
suppliers of as payment for food. This payment then
becomes the input for the non-Parisian food producer,
who consumes the Parisian good as input to produce the
non-Parisian food for Paris.
All told, there is a complete circuit. Every part of
this circuitous process is intended by somebody whose
intention is relevant. And being relevant means that
it is subject to precise observation and measurement,
and to causal linkage.
The tragedy is that people who do not care about the
causal issue do not see brightly, for example, as they
do not see that the causal linkage is between food
supply and the profit from it, and not with the
non-occurrence called feeding Paris. They cannot find
the intention because they are not looking for it.
Nobody feeds Paris, and the event named "feeding
Paris" never occurs. Parisians buy food EVERYDAY. Are
Parisians beggars to let somebody feed them?
The tragedy of the Austrian School's obsession with
words without measurement is that it often loses
track, like in case of grandpa Adam Smith, and
meanders into fanciful imagination of the empty
wilderness. Consequence, for example, is an
essentially meaningless word until it is converted
into a variable subject to strict observation and
measurement. Intention likewise is a vaporous word
unless it is converted into a strictly defined
variable. Thus eating food is not a consequence of
feeding by the producer: it is a consequence of buying
food by the consumer. And feeding Paris is not
the consequence of the producer's action of selling
the food: the earning of revenue is the consequence.
The quoted passage omits the act that creates the
consequence, and wonders why the consequence occurs.
The phrase "but Paris gets fed" should be changed to
"and Paris gets billed for the food its eats" to
become a truthful description of what happens.
The tragedy on the neoclassical side is that it is
obsessed with the idea of ONE decision maker as in the
phrase: "no one person decides to feed Paris; but
Paris gets fed,".
Now, whose idea is it that there must somehow be ONE
person to decide (to feed Paris)? What is wrong with
many persons? The idea of coordination in the market
place without ONE central planner is the
relic of an era that did not have the brightness of
Leontief.
Students of Leontief can very clearly see that there
is never a need for any ONE person to generate the
entire aggregate outcome of the market. The aggregate
outcome combines the small parts played by different
individuals, each of whom has a very limited
intention. But when all those intentions are added
(and they must be added within one complete circuit of
exchange to describe the entire economy-wide outcome),
the analyst easily understands how the aggregate event
occurred. No individual agents has to see his role in
the larger order, but the analyst must see it; and see
he can and brightly too, if input-output model is his
tool.
The micro-orientation is the tunnel vision of the
analyst who sees dimly and incompletely. Thus, eating
the food is carried out as intended by the consumers
and there is no reason to search for the
producer's intention behind the consumer's act. The
analyst disregards the Parisian's intention to eat and
sees the phantom named unintended consequence (feeding
Paris).
So all I can pray is: Let there be light.
Mohammad Gani
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