Lindblom - The Market System - Afghan Journalists' Committee

10Market-System EfficiencyIn the real world, how are efficiency prices established?Strictly speaking, they are only approximated. How approximated?By interchanges in markets in which, as in thegame in the gym, participants can endlessly engage in favorableexchanges. As in the game, it is required that thepresence of many buyers and sellers constrains monopolyand that no one has the power to fix prices—that is, governmentdesists on the whole from price fixing. To the degreethat these conditions are met, market systems give rise toand make use of efficiency prices.That is a core claim for market-system efficiency: efficiencyrequires efficiency prices, and market systems establishthem. The brevity with which I have just put it shouldnot detract from its fundamental significance.This first great and distinctive claim to efficiency ismade for all market-system choices where efficiency pricesprevail. It is a claim made both for consumer choices and forentrepreneurial choices about what to produce and of whatquality and with what inputs. It is also made for entrepreneurialchoices on technology and capital investment.Andrew Carnegie’s legendary entrepreneurship is an exampleof how capital is accumulated and new technologiesare introduced in a market system, both hinging on the efficientchoices that efficient prices make possible. “One ofthe chief sources of success in manufacturing,” he wrote,“is the introduction and strict maintenance of a perfect systemof accounting, so that responsibility for money or ma-