Who’s in Charge?
Chapter 7: Governing through the Market
7. Governing through the market One of the great intellectual achievements of modern economics has been to work out very precisely the circumstances under which decentralized systems of market exchange can produce results that are efficient . . . much of the pattern of modern life has emerged without ever having been consciously willed by anyone. Paul Seabright1 INTRODUCTION The brief discussion in Chapter 1 that recounted some of the many uses and changes of the lowly potato offers a starting point for understanding how both old and new technologies are governed through the marketplace. Generally markets require three things: voluntary buyers; voluntary sellers; and some form of price discovery to match potential supply and demand. New technologies at times have none of those opportunities. These factors in many cases need to be created, adapted and adopted, all of which have both economic and non-economic aspects. Different technologies will have different needs and different responses. Iterative technologies, such as those that simply allow for cheaper production, often are relatively easy to fit into existing production and marketing systems. Similarly, small, incremental improvements in the quality of the product, which do not introduce any new attributes but simply differentiate the product based on enhancing existing attributes, would face few challenges in entering and sustaining a market. In most of these cases firms will have benchmarks against which to align their technologies and to establish competitive pricing structures. For example, the introduction of new cultivars in the potato industry is a relatively seamless process. Individual...
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