|Peter Boettke|

In one of my favorite passages from The Wealth of Nations Adam Smith explains the ability of markets to function and improve the lives of the participants through the mutual gains from trade and the benefits of innovation even in unfavorable circumstances. To quote Smith:

The natural effort of every individual to better his own condition, when suffered to exert itself with freedom and security, is so powerful a principle, that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often incumbers its operation. (1776)

We can see this across the globe, markets function to coordinate supply and demand in all variety of 'colored markets' --- above ground, underground, and some combination of legitimate and illegitimate activity. As Pete, Chris and I wrote in a paper published a decade ago there are "Many Faces of the Market."

Markets are omnipresent, but not all markets are equal with respect to the welfare properties they exhibit.

Let's go back to Smith's quote about the ability of the market to surmount even "a hundred impertinent obstructions". Now consider this new video and study by my Mercatus colleague Patrick A. McLaughlin on the regulatory state and its growth and impact on the economy during the past 60 or so years.

Smith was right about the ability of individuals to circumvent a hundred impertinent obstructions and the folly of human laws, but how about a million? At some point, as was the case in the former Soviet Union, the nature of the operation of the market is radically transformed and ceases to be able to function as a vehicle for carrying a society to wealth and prosperity.