We have an assumption in our society about how markets automatically distribute things optimally. But Adam Smith himself said that it’s the social interactions interacting with the market that cause equitable distribution. In his view, the invisible hand suggests that the exchanges between people establish the norms that divide market opportunity. So it is the social exchanges that are the main actor, not the market.
In our society, efficient allocation generally comes from the regulator or market maker setting rules that they believe are efficient and not from the market itself. Despite a number of Nobel Prizes around market efficiency, the math says that it is very difficult to achieve efficient allocation using markets. So despite having almost a religion around markets as mechanisms for equitable distribution, it’s not generally true. We have ignored the fact that there are constant exchanges going on between people and that, very often, the most powerful and important kind of economic incentive comes from peer-to-peer exchanges, rather than from markets.
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