A couple of days ago, I explained why markets should be viewed as living (complex adaptive) systems. It is important to understand that the ability of living systems to observe their own behavior makes it possible for them to change behavior.

It is also important to understand that the discrete elements of living systems act independently. Thus, aggregate data can provide misleading information to observers.

Living systems have another characteristic that distinguishes them from mechanical systems: they heal themselves. Living systems in nature heal with little or no assistance. Some organisms can regrow lost limbs.

The medical interventions developed by humans don't fix people. They aid people in healing themselves.

The healing capability plays an important role in the living systems we call markets. When shortages appear in one segment of the market producers and consumers will adjust their behavior to heal the problem. The same applies to overproduction. How the markets make these adjustments I will save for another publication. But remember that the market heals.

People who want the government to "fix" the economy should keep its healing capability in mind.

Most of the problems that we have with the economy occurred as a result of some sort of government action. The government does not create anything; therefore, it only has the capability of redistributing existing resources. Most unemployment results from government intervention, e.g. minimum wage laws prevent people from entering the market at low-wage levels. How many workers were laid off when the government decided to stop the XL pipeline or stop building the wall on the southern border?

Many other examples exist, but let’s focus on one of the current major problems in the economy: price inflation. Price inflation exists for one single reason: money created to finance government spending. On the way to having generalized price increases a lot of malinvestments and misallocations of resources occurred.

Many people are now asking what the government can do to bring down prices. The simple answer is nothing. Any action the government takes at this point to reduce general prices will simply make the matter worse. Expanding the money supply created misallocations on the upside. Contracting the money supply will create misallocations on the downside.

The market, as a living system, will adjust to the new quantity of money. Prices will remain high, but the quantities of goods and services will rebalance at a healthy level.

Don’t try to fix the economy. Let it heal.