Lindblom - The Market System - Afghan Journalists' Committee

Market-System Efficiency 141terials can be brought home to every man.” Between 1875and 1898 his attention to efficient choice brought the priceof steel rails down from $160 a ton to $17, with enormousconsequences for growth not only in the steel industry butthroughout the economy in the many industries using steelin some form as inputs.I do not want to overstate or oversell so large a claim asthat efficiency prices make market systems efficient. Inreal-world market systems prices are often distorted bymonopoly and government price fixing. And it is a claimonly about allocative efficiency in the production of servicesand goods, leaving questions open about other kindsof efficiency. Still, the claim of efficiency through efficiencyprices is a broad and fundamental one. It is a claim that cannotbe made for hypothetical physical planning systemswithout money and prices. It cannot be made for communistsystems because, although they use prices for somepurposes, their prices are highly arbitrary. Nor are theirproduction decisions governed by prices, as they are in a marketsystem. In short, market systems practice a rough efficiencypricing widely and routinely; other real and hypotheticalsystems do not.One might be tempted to believe that efficient choice isless important than that entrepreneurs simply producemore physical capital at technological frontiers. Market efficiencythrough efficient choice and efficiency prices is toostatic a picture, one might think; it lacks the color and lifeof dynamic growth processes.No question about it, capital creation, technological innovation,and the energetic entrepreneurs who undertakethem are a large part of the explanation for market-systemaccomplishments. Their contribution shows up in growth.But entrepreneurs do not simply introduce new methods in