Unbeatable, Imperfect Markets
While reading Chapter 4 Unbeatable, Imperfect Markets in The Seen, the Unseen, and the unrealized, I enhanced my knowledge and understanding of production, imperfect markets, the role that the government plays in imperfect markets, and so on.
Production in itself can be hard to further look upon to those who do not know the insights of it. Bylund talks about the concept of an imperfect market, which can lead to inefficiencies, like higher prices, reduced competition, and negative externalities. An imperfect market has buyers and sellers who do not have equal power. Without equal power, one party has an advantage over the other. Assume a seller may set a highly absurd price for an item or service and the buyer is still willing to pay that amount. Then there is the power of the other party, which is where the seller may negotiate a lesser price than what was initially meant to be sold for. So for that sake, those powers can lead to market inefficiencies. So for example look at Apple, Apple has the power of influencing the market price of its products. It may also be hard to find alternatives for Apple products and when they do they might even have to pay higher prices for them, making it a nonefficient outcome from a market perspective.
Bylund goes on to talk about the process of production through the eyes of Adam Smith.
Smith believed that those who are better at a certain task should focus on that specific task through the production process. He claimed that would save time and be more beneficial in the long run due to someone perfecting their task rather than doing it all. Making their production time smooth and valuable on time.
To go along with Smith, my job, for example, we each have a certain part of the job that we do. I will control emails, social media, and marketing. While one of my co-workers will complete wholesale orders and another one of my co-workers will take on handling inventory. That is how our “system” works for everything to run smoothly and for us to not get in the way of one another.
“In other words, working alone each worker cannot make even twenty pins; working together, they make almost five thousand pins each” (Bylund 2016).
I agree with Bylund and how the production of something can get done more efficiently with the more help you get. Say someone starts up a graphic t-shirt company and they print each shirt one by one only being able to print about 10 shirts at the end of the day due to how long the process takes when coming up with a design for a shirt, to making the stencil for it, picking the placement, and so on. Yeah, that may work for someone at the beginning of their business first starting up but how about in a couple of months or a year from their start-up date, they could be receiving 200 orders in a day. One person isn't going to be able to do that whole process by themselves. With that being said, that person would have to take on employees for them to fulfill their consumers and carry out a successful production process.
The Process of Creative Destruction
We all know that our market is always changing and it comes down to supply and demand.
“The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates” (Schumpeter, 1962, p.83).
The capitalist system is always evolving and adapting to new forms of industrial organization. The market is all about being competitive and to remain competitive, organizations must continually restructure and improve their processes as they develop and expand. With that being said the industrial organization process is motivated by the desire to remain ahead of rivals and capitalize on new opportunities for development and profitability. Also, with no new goods, markets, or methods of transportation, there would never be markets that satisfy upcoming and transforming needs. The world would simply just not evolve if it wasn't for our market changing so much.
Creative Destruction, according to Schumpeter, happens when an old product or service is replaced by something new. According to Schumpeter's idea of creative destruction, economic development, and progress need innovation and change. While the process may be upsetting to certain individuals and communities, it will eventually result in a more dynamic and successful economy.
Conclusion
In order for us to ensure the ongoing success of our capitalist system, we must adjust and accept changing markets as our market expands. Our economy is all about change, and I believe that in order for us to continue moving forward, the market should never stop developing, because no market change means no advancements in our world's technology, machinery, manufacturing, and so on.
References
Bylund, P. L. (2016). Chapter 4: Unbeatable, Imperfect Markets. In Seen, the unseen, and the unrealized: How regulations affect our everyday lives (pp. 47–72). essay, Lexington Books.
Schumpeter, J. A. (1962). Chapter VII: The Process of Creative Destruction. In Capitalism, socialism and democracy (pp. 81–86). essay, Harper Torchbooks, Harper & Row.