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The market was never set up by people to achieve a purpose. It is not a device or an invention aimed at satisfying an intention. “Market mechanism” is a metaphor. The market—as a set of continuing relations among people—emerged, unplanned and unintended, from exchanges, initially barter, in which the parties intended only to improve their respective situations. Lecturing at FEE . . . , Israel Kirzner recalled that one of the first things Mises said to him as a graduate student was, “The market is a process,” by which he meant “a series of activities.” This is similar to what the French liberal economist Destutt de Tracy (1754–1836) wrote in A Treatise on Political Economy, “Society is purely and solely a continual series of exchanges.”
Mises, Hayek, and Tracy help us to sort out the rationing question. I submit it makes no sense to say that an undesigned series of exchanges rations goods. If we were to observe a free market (wouldn’t that be nice?), what would we see? Rationing? Allocation? Of course not. We would see people exchanging things—factors of production, services, and consumer goods—for money. Where would they have gotten those things? From previous exchanges or original appropriation from nature.
When a person buys five apples in a grocery store rather than 10 because he wishes to use the rest of his money for other purposes, it seems entirely wrong to say the market (or even the grocer) has rationed the apples. The customer makes his choice on the basis of his preferences and the money available (which is the result of previous transactions).
It is true that as a result of market exchanges, goods and resources change hands and (except for land) locations. But in no sense is this rationing or allocation. The resulting arrangement of resources is simply a product of many transactions. Of course, people’s choices of what and what not to buy and sell at which prices create an arrangement of goods and resources that tends to be intelligible in terms of consumers’ subjective priorities. But that does not warrant calling the process rationing or allocation.
Those words—especially ration, which shares its root with rational—suggest conscious decision-making—as part of a plan—by an agent. In a free market there is no consciousness overseeing this “distribution”—another inappropriate word when it comes to describing the market process.
I am not saying anything that a good economist or thoughtful person doesn’t know. I am merely pointing out that we can be more effective in the health care debate if we are more precise in our language. We do not face a choice between methods of rationing medical services. We face a choice between rationing according to a bureaucratic plan and being freed to engage in mutually beneficial exchanges.
Sheldon Richman is editor of The Freeman, where this article originally appeared.