Yesterday, I was discussing regulations with some friends. They believed that actions by individuals are unplanned and lead to chaos without sufficient governmental interference with these actions.
They failed to appreciate the fact of human nature that Murray Rothbard addresses on pages 278-9 in Man, Economy, and State.
Ex ante (a person who acts) appraises his situation, present and prospective future, chooses among his valuations, tries to achieve the highest ones according to his “know-how,” and then chooses courses of action on the basis of these plans. Plans are his decisions concerning future action, based on his ranking of ends and on his assumed knowledge of how to attain the ends. Every individual, therefore, is constantly engaged in planning. This planning may range from an impressive investment in a new steel plant to a small boy's decision to spend two cents on candy, but it is planning nevertheless. It is erroneous, therefore, to assert that a free market society is “unplanned”; on the contrary, each individual plans for himself.
But does not “chaos” result from the fact that individual plans do not seem to be coordinated? On the contrary, the exchange system, in the first place, coordinates individual plans by benefiting both parties to every exchange. In the second place, the bulk of the present volume (Man, Economy, and State) is devoted to an explanation and analysis of the principles and order that determine the various exchange phenomena in a monetary economy: prices, output, expenditures, etc. Far from being chaotic, the structure of the monetary economy presents an intricate, systematic picture and is deducible from the basic existence of human action and indirect exchange.
Just because sometimes things appear chaotic does not mean that there is no order. Instead, human institutions and interactions develop a spontaneous order.
We economists need to differentiate between things we do not understand and seem chaotic and things that are actual chaos.