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CHAPTER 5 Big Money and the "Spontaneous Market Order"
The marketplace, we are told, is a "spontaneous market order"1; it must not be interfered with. But the marketplace is increasingly behaving like a casino that is dominated by Big Money, Big Banks, and Transnationals. Their power has replaced the power of kings. Big Money constantly interferes with the marketplace. Consider Canada's big banks for a moment. Outwardly, they appear to be competing. But a closer look at their behavior tells another story. Banks do not provide detailed cost information for their financial transactions. But a few graphs showing per-branch revenues and per-branch non-interest expenses (which are not unrelated to prices and costs), reveal substantial conscious parallelism2 -- if not tacit collusion. This, and other powerful evidence, corroborate the fact that
The marketplace is most certainly not a spontaneous market order. It is driven by cycles -- credit cycles, trading cycles, overinvestment cycles, etc. Look at the data (summarized graphically in Book II). There is nothing spontaneous about the last two overinvestment cycles in commercial real estate. If anything, the overinvestment cycle appears to be
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See Friedrich A. Hayek, Law, Legislation and Liberty, Vol. 2, 1976, at
107-132 (The Market Order or Catallaxy), especially 109 ("[a] catallaxy is thus the
special kind of spontaneous order produced by the market through people acting within the
rules of the law of property, tort and contract.") 2 For a discussion of parallelism, collusion, and monopolistic competition, see Martin Shubik, with Richard Levitan, Market Structure and Behavior, 1980. |
