Freedom, Society, and State - Ludwig von Mises Institute

esources as the consumers do to the sellers of final
go od s. Thus, pr ices for the var i ous factor s of product
i on tend to reflect the demand for them by the entrepreneurs.
Since what the entrepreneur is able to bid
is limited by his expected yield on the final sale of
his product, the libertarians believe that the factors
of production are channeled into production of the
goods most in demand by the consumers. Those who best
serve the consumers earn the greatest profits and,
hence, are able to offer the highest bids for the resources
they need. If returns are not high enough to
cover the cost of a particUlar operation, this means
that there is, in the eyes of the consumers, a more
important use for the factors of production elsewhere.
The market, therefore, allocates resources to their
m0 s t pro due t i ve poi n t reI a t i vet 0 the prior i t y s ystem
that the consumers have established.
This can be demonstrated by the following. Assume
t hat the rna r k etis in eq u iIi br i urn. Al so as s ume t ha t a
new technological breakthrough has enabled the product
i on of a new commod i ty that is highly valued by the
consumers. The production of the commodity, however,
requi res the use of factor A. Those entrepreneurs who
perceive this new profit opportunity will begin to bid
for the fa c tor. T his inc rea sed competit ion for the
available supply of A will cause its price to rise,
forcing some of the users of A to curtail their purchases.
But who wi II be the ones forced to curtail
the i r pur c has e s ? C I ear 1y, i t wi I I beth0 seemp loye r s
of A who are receiving the least remuneration for their
product from the consumers, i.e., those who are employi
n g A init s I e a s t produe t i ve poi n t • Inth i s wa y, the
use 0 f A i s c han n e 1 e d f r om use s t hat the cons urn e r s
value less highly into uses that they value more highly.
But fur ther, the rise in the price and therefore
the prof it margins of A will encourage other entrepreneurs,
also anxious to make profits, to expand the
supply of A.
In other words, the individualist anarchists believethat
the price fluc t ua t ion s 0 f the rna r k e t proc e s s
automatically coordinate the actions of all participants
in the system by transmitting the relevant know­
1 e d g e pre cis ely tot h 0 s e wh 0 r equi ret hat pa r ticu 1a r
information to guide their actions. For example, informa
t i on about rubber is commun i ca ted to tire manufacturers,
while information about steel is communicated
to automobile manufacturers, etc. As F. A. Hayek
states, "The marvel is that Without an order being
225