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The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

Henry Hazlitt
Economics in One Lesson

Complex Markets

Let's examine the structure and complexity of markets.

Markets, like all living systems, comprise a level of complexity beyond the comprehension of the human mind. The connections amount to billions—probably trillions.

Although the flow of production in an economic system travels from higher level producers, to lower level producers, ultimately to consumers, the flow of influence actually runs in the opposite direction—from consumers to producers. Prices throughout the structure of production, for example, reflect the preferences of consumers; not the "costs" of producers.

To demonstrate the flow of this influence I have presented two versions of a model that shows the complex connections in a simple market.

Complex Market Model (Prezi)
The presentation (using Prezi) steps through the model created in PersonalBrain (see below). It should give you a sense of the complexity of even a small market. This presentation guides you through the model step by step. You should view it first.
Ludwig von Mises

Lugwig von Mises
The father of modern Austrian School of Economics.

 

Economic Systems