Wednesday, June 15, 2011

The More, the Merrier (and Wealthier)

Bryan Caplan has an interesting post on network products. A network product is one that improves simply because more people use it. He gives the examples of phones and Facebook, both of which improve the more people there are who use it. He points out that

Economists (and people generally) underestimate true economic growth for all expanding network products. When you measure the quality of network products, you can't simply look at them in isolation. You have to measure what you can do with them.
He finally concludes that "Quantity Is Quality."

But wait, a spontaneous order is also a network. Shouldn't any network have this effect? May it not be the case that free markets improve in quality when they expand in size, whether it be through population growth or by more people being included in the market economy? May it not also be the case that the market economy can in fact do more precisely because they expand in size? In other words, for the market economy as a whole, quantity is quality.

How might this help us understand the nature of the market economy as a spontaneous order? Or at least help us understand why and how the market economy necessarily improves life for everyone the more people are involved in it?
Post a Comment