What makes the market vibrant? It is because the market itself can generate a spontaneous order, where everyone, guided by an invisible hand, spontaneously maximizes their personal interests. The free competition in the market leads to the survival of the fittest, with a continuous ebb and flow.
What leads the market to depression? It is when free competition is restricted, and a powerful directive attempts to guide individuals on how to use their capital, directing personal economic activities, thereby eliminating the self-sustaining forces and mechanisms within the market order.
Due to the limitations of human rationality and cognition, effective resource allocation can only occur through market exchange and price mechanisms, which leads to economic prosperity and the advancement of human society. Therefore, a free economic order, a free enterprise system, the freedom to innovate, the freedom to contract, and the freedom to trade are the unstoppable trends of human societal development.
An economic directive constructed according to theoretical concepts and the blueprint of an ideal society replaces the free market price mechanism for resource allocation, meticulously directing individual economic activities in every detail, which completely exceeds everyone's experience. The result is often counterproductive, leading not only to economic inefficiency but also dragging the entire social economy into an irretrievable abyss.
The vitality of the market comes from free competition, not from directives. The emergence of "country lanes" gives us insight. Initially, there were no paths in the fields; everyone passing through would take the route they deemed best. Once a route is taken by someone, others are more likely to follow it, although later individuals may choose their preferred new routes. As more people traverse the area, a path repeatedly used will emerge, becoming clearer over time, ultimately forming the country lane we see.
Hayek explains that the formation of country lanes is certainly the result of conscious choices made by individuals, but it is formed through the separate choices of many individuals, which then naturally aggregate. It is not consciously designed by any authority, nor has it undergone collective deliberation and planning. This path gradually emerges from the choices of countless individuals, representing a result of natural evolution.
The insight that "country lanes" provide to the market is that even without any comprehensive organization or rational planning, and without any coercive intervention from regulators, order can spontaneously arise. This spontaneous order has a distinct advantage: there is no coercion throughout the entire process of establishing order, nor does it harm any individual.
Ironically, once the country lane is formed, there will be managers who believe that the path is not straight enough or wide enough, which is detrimental to people's travel. Thus, they go to great lengths to hold meetings and make decisions to organize manpower and resources to widen and improve it, intervening in management so that everyone uses this path. In the process of management, numerous vested interests related to this "country lane" will be created, whether they are economic beneficiaries or career beneficiaries, who will eagerly hire economists and sociologists to justify the "rationality" and "public interest" of their existence and actions.
In the past, people on this path walked their own ways without interfering with each other, and it was unheard of for the first person to walk this path to come back and say, "This is my path" or "Charge a toll." But now, if there is a small stone on the road that hurts someone's foot or the ground is wet and soaks someone's shoes, the immediate thought is: this should be managed by a certain department, and that should also be managed by a certain department.
For ordinary people, it is difficult to understand that when a market is overly regulated, it may completely lose its immunity. On one hand, regulators believe it is necessary. On the other hand, people show a demand for it. As a result, regulation will expand endogenously and become increasingly severe. Market regulation leads to a large number of short-term behaviors and opportunistic actions, making it difficult to maintain credibility. If everyone lacks credibility, someone will step forward to say that regulators are needed to maintain order. This means that regulators are actually creating demand for themselves.
They killed the cat, and as a result, the mice ran rampant. Then, they pretended to learn how to meow to scare the mice. Unfortunately, the mice continued to multiply, leading to an increasing number of people pretending to meow. Thus, after eliminating the most important force that maintains market competition and order, regulation itself continuously expands endogenously.
If we compare the cat to market competition, it will naturally eliminate the mice. Unfortunately, the managed economic activities have eradicated the cat, and people have become accustomed to dogs catching mice. After the transition, the cat has not had time to reproduce, and the mice have increased, but people mistakenly believe that there are too few dogs, so they call for more dogs. However, with too many dogs, the cat cannot survive.
During the planned economy period, many departments were established to eliminate the market and replace it. These departments transformed during the transition period and appeared as regulators of the market, but their power did not diminish. Consequently, regulating the market itself may become the greatest harm to the market.
After regulators eliminate the self-sustaining forces and mechanisms within the market order, they will continuously create demand for themselves. The introduction and strengthening of regulation will form a vicious cycle. The more you regulate, the worse the credibility in society becomes, leading to more deception and fraud, which in turn compels you to further strengthen regulation and continuously increase artificial, super-economic measures.
Originally, you could eat normally to sustain your life, but now someone tells you that you are sick, and it must be because you haven't eaten well. They block your mouth and give you glucose. Then, they keep giving you intravenous drips, only to find that your body is getting weaker and weaker, yet they believe that the glucose is still too little and should be increased, continuing this until you die.
The vitality of the market comes from free competition, while the market's depression arises from chaotic governance. We must be vigilant against practices that perpetuate planned economic thinking in the name of "regulating the market."