Louisville Process Theology Network

Do human systems work like machines or like organisms? Here
are two views.

“The private enterprise system, then, might be compared to
thousands of machines, each regulated by its own quasi-automatic governor, yet
with these machines and their governors all interconnected and influencing each
other, so that they act in effect like one great machine.

Most of us must have noticed the automatic governor on a
steam engine. It usually consists of two balls or weights which work by
centrifugal force. As the speed of the engine increases, these balls fly away
from the rod to which they are attached and automatically narrow or close the
throttle value which regulates the intake of the steam and thus slow down the
engine.

If the engine goes too slowly, on the other hand, the balls
drops, widens the throttle value, and increases the engine’s speed. Thus, every
departure from the desired speed itself sets in motion the forces that tend to
correct the departure.

It is precisely in this way that the relative supply of
thousands of different commodities is regulated under the system of competitive
private enterprise. When people want more of a commodity, their competitive
bidding raises it price.

This increases in the profits of the producers who make that
product. This stimulates them to increase their production. It leads others to
stop making some of the products they previously made, and turn to making the
product that offers them the better return.

But this increases the supply of that commodity at the same
time that it reduces the supply of some other commodities. The price of that
product therefore falls in relation to the price of other products and the
stimulus to the relative increase in its production disappears.

In the same way, if demand falls off for some product, its
price and the profit in making it go lower, and its production declines.”

From “Economics in One Lesson” by Henry Hazlitt, Austrian
School economist

“Free markets, in theory, are supposed to be self-correcting.
When they’re knocked off balance, changes in prices should gradually bring the
system back to equilibrium. The some process of regeneration is supposed to
operate in political systems, too …

We are coming up to the 10^th anniversary of one of
the biggest shocks ever to the US political system – the terrorist attacks of
Sept.11, 2001. Here, too, you can argue that the healthy dampers didn’t work.

Instead, the initial tremor of the attacks was magnified by
the reaction. The terrorist assault, horrible as it was, led to what historians
will likely see as an overreaction – two foreign wars and national exhaustion. …

The effort to understand market failure and social disorder
helped create modern economics and political science.

It was the central insight of John Maynard Keynes that the
self-correcting mechanisms of classical economics didn’t always work. Markets
got stuck at less than full employment.

The market forces that should have restored full use of idle
workers and machines didn’t always work – partly because individuals got scared
and preferred to hold cash rather than invest in productive assets, no matter
how low the interest rates fell.

This is why Keynes argued for government intervention to
nudge the economy from the low-output trap where it had gotten stuck. It wasn’t
that he liked government spending.

But, he recognized that markets sometimes overreact –
amplifying the fears and preferences of individuals into collective behavior
that makes everyone worse off. We have been seeing a contemporary version over
the past several weeks, with frightened investors bouncing the global economy
like a ping pong ball.”

From a column in September by David Ignatius of The
Washington Post.