What does a flock of birds have to do with markets?

Probably not a whole lot.

But, they do have a lot to teach us about the behavior of markets and other complex living systems, e.g. individual humans, neighborhoods, markets and a flock of birds.

https://www.youtube.com/watch?v=A6nvvFkbRkY&t=5s

Flocks of birds, like the one in this video, consist of ten, hundreds, and maybe thousands of bird, each acting individually without external controls. Yet, they perform these amazing, intricate, maneuvers without crashing into one another. Does that mean that these bird-brains study massive instruction manuals full of rules? Do they have flight controllers in a tree near by, guiding their every move with broadcast signals?

It seems that very simple rules can guide these complex systems. Students of complex systems have built computer models that emulate the flocking behavior. Without the benefit of interviewing the participating birds, modelers have succeeded in building models that behave very much like flocking birds with only a few simple rules. One such model uses only three rules:

1. Separation – avoid crowding neighbors (short range repulsion)
2. Alignment – steer towards average heading of neighbors
3. Cohesion – steer towards average position of neighbors (long range attraction)

See description of Flocking Behavior.

Might the people who believe that markets require extensive regulation and supervision — to prevent crashes and collisions — have it all wrong? Could markets — composed of large numbers of individuals acting in their own self-interest, just like the birds — operate far more efficiently than the highly regulated markets we have today.

Consider three possible rules:

1. Live your life and allow others to live theirs.
2. Exercise your liberty by taking responsibility for your actions and expect others to do the same.
3. Do what you want with your own property and leave other people’s property alone.

Oh, of course, that would not work. People all have such self-destructive tendencies. Markets require outside intervention — and lots of it. After all, the market participants don’t have the mental capacity of birds.