some utopian idea of 'the market' resembles bottom-up processes yes. But the modern market (and given that the author chose to use chips as an example) does not.
The modern economy is to a very high degree planned, mind you not only by the state, but by corporations. The corporation itself is a top-down designed entity, internally displacing markets.
Everything that enables modern productivity gains occured in the context of streamlining, designing, and ordering production. The shift-worker at the conveyor belt at a 400k population company isn't exactly comparable to the medieval merchant on the local bazaar.
And I suspect that the author is implicitly critizing this, but there's a reason why this development took place. Even if the rigidly designed chair doesn't appear to be innovative, top-down design actually is. Even ardent capitalists like Schumpeter recognised that there is more inherent dynamism in large monopolies than there is in some natural, unordered market. You can't go to the moon by climing up trees as the saying goes, and that's why nature without design never made it there. The nation state, the modern company and all those institutions won because the incrementalism found in bottom-up design is inherently limited.
Meaningful markets account for a relatively small portion of modern economies.
Companies hate to compete and avoid doing so whenever possible. This can be as simple as ISP’s avoiding investment in areas with an existing ISP to complex backroom deals.
Internally, companies have full on top down planning just like governments. At larger companies this often results in silly levels of inefficiency.
> Internally, companies have full on top down planning just like governments. At larger companies this often results in silly levels of inefficiency.
This leads to Coase's transaction cost theory of the firm.
" for Coase the main reason to establish a firm is to avoid some of the transaction costs of using the price mechanism. These include discovering relevant prices (which can be reduced but not eliminated by purchasing this information through specialists), as well as the costs of negotiating and writing enforceable contracts for each transaction (which can be large if there is uncertainty). Moreover, contracts in an uncertain world will necessarily be incomplete and have to be frequently re-negotiated. The costs of haggling about division of surplus, particularly if there is asymmetric information and asset specificity, may be considerable."
“Internally, companies have full on top down planning just like governments.”
They are basically run like communist states. 5 year plans, celebrating plan achievement and so on. It’s all there. The only difference is that their outside borders aren’t protected so they can’t become as delusional as a communist state can be.
> Meaningful markets account for a relatively small portion of modern economies.
There's no way that's true. Like, how many monopolies in America, say, can you even name? I've almost never in my entire life been in a situation when I literally only had one choice for a product or service, even in areas of so called natural monopolies.
Edit: Actually I can name some true monopolies: NBA, NFL, etc.
I would add, Patent protected drug companies, local electric company’s, railroads, water, cable TV, etc and arguably IP including Books, Movies, Games etc are true monopolies. Don’t forget governments as the Social Security, FBI, etc does not compete on an open market. Collectively, government spending is a huge portion of the economy.
OPEC (Oil) and De Beers (Diamonds) are not true monopolies, however they have enough control over supply to have pricing power.
But as I alluded to, Walmart’s 2.3 million employees don’t use markets internally to set prices for services. IT, Legal, HR, etc are not separate companies. Instead executives just allocate and get allocated money for a specific use.
It’s not obvious how you could measure such a wide range of hidden interactions collectively. But, market transactions have real overhead so it should be as not surprise it’s limited. After all your spouse will tell you to take out the trash rather than paying you to take out the trash.
The modern economy is to a very high degree planned, mind you not only by the state, but by corporations. The corporation itself is a top-down designed entity, internally displacing markets.
Everything that enables modern productivity gains occured in the context of streamlining, designing, and ordering production. The shift-worker at the conveyor belt at a 400k population company isn't exactly comparable to the medieval merchant on the local bazaar.
And I suspect that the author is implicitly critizing this, but there's a reason why this development took place. Even if the rigidly designed chair doesn't appear to be innovative, top-down design actually is. Even ardent capitalists like Schumpeter recognised that there is more inherent dynamism in large monopolies than there is in some natural, unordered market. You can't go to the moon by climing up trees as the saying goes, and that's why nature without design never made it there. The nation state, the modern company and all those institutions won because the incrementalism found in bottom-up design is inherently limited.