Scott Rasmussen: Stock exchange closure highlights value of freedom
Many years ago, I visited Cambodia with my family. One day, a local resident took us to a small village of 53 huts far off the beaten path. In many ways, it was closer to the 13th century than the 21st. It was truly an eye-opening experience.
As was the custom, we first presented ourselves to the village leader. Walking to his hut, we were very conscious of many eyes peering out windows wondering who these strangers were. Once the leader welcomed us, however, people came pouring out and were quite friendly.
But it was clear that nothing happened in that village without the blessing of the chief.
Thoughts of that visit came to mind as the New York Stock Exchange shut down for three hours on Wednesday.
The most amazing thing about that entire episode is that nobody noticed for about 20 minutes. Think about that for a moment. Even though one of the central pillars of our economic system — the very symbol of Wall Street — completely shut down, there was no panic, no breakdown of the social order and no mass reaction of any kind.
“In this era of high-frequency trading and up-to-the-second news, how could that be?” wondered Steve Goldstein, the D.C. bureau chief for Marketwatch.com. Nobody noticed because “roughly 11 stock exchanges, 44 alternative trading systems and more than 200 broker-dealers all trade the same stocks.”
So, the world’s most influential stock exchange shut down, but traders didn’t notice because they had options. The dispersal of authority presented many paths for people seeking solutions, and people found them. That’s something to celebrate.
In ancient societies, like the one we visited in Cambodia, decisions were made at the top. When problems occurred, people counted on the leaders to guide them.
But in modern societies blessed with freedom, problems are solved from the bottom up. Long before President Obama and other officials offered assurances about the Stock Exchange, the people directly affected had already found a workaround.
That’s not to say the incident had no broader impact. The Stock Exchange itself will have some work to do reassuring nervous investors. It may scare some more cautious investors out of buying stocks altogether. But that’s the way the process is supposed to work. Those who let down their customers have a heavy burden to win them back.
The larger story, however, is that dispersal of authority works. Free societies work because no one person or group is in charge. If anyone has a problem, they can turn to a variety of sources for help — family, friends, co-workers, faith leaders, medical professionals, online service providers and more. The choice depends upon the nature of the problem and who has earned our trust.
To some, this sounds like chaos. But in reality, it’s the only way to prevent chaos.
In a modern society, no person or government can possibly have all the information needed to address the daily challenges we face. Making decisions without the necessary information creates chaos.
On the other hand, when people freely cooperate to solve problems on their own, solutions get found. As the closure of the New York Stock Exchange proved, top-down governance simply can’t compete.