Is the economy “overheating,” or is it “humming” along smoothly? Should the Federal Reserve “prime the pump” to spur investment, or “pump the brakes?”

Such questions, of course, use an engine metaphor to describe the economy. But why?

In fact, the economy is more like a complex ecosystem rather than an engine or machine.

Indeed, a machine is consciously designed to accomplish one main purpose, and its parts fitted together to achieve that objective.

The economy, in contrast, is comprised of a complex, constantly evolving web of transactions between buyers and sellers. Elaborate and intricate patterns of production and exchange involving human beings emerge, based on the multitude of their individual preferences and desires. These patterns are constantly in flux.

Unlike a machine, which is made to accomplish a singular goal or purpose, the economy does not have one goal or purpose, but billions of them.

What is ‘the Market’?

In his 1949 magnum opus “Human Action,” economist Ludwig von Mises provided an insightful description of the economy. Referring to it as “the market,” Mises wrote:

“The market is not a place, a thing, or a collective entity. The market is a process, actuated by the interplay of the actions of the various individuals cooperating under the division of labor. The forces determining the – continually changing – state of the market are the value judgments of these individuals and their actions as directed by these value judgments.”

Note Mises’ emphasis on the market not being any sort of entity, meaning that it can have no designed purpose or desired outcome. Rather, he describes the economy as a process, one comprised of “the adjustment of the individual actions of the various members of the market society to the requirements of mutual cooperation.”

Thus, the economy is not an entity or organization with a will of its own. Instead, it is a self-organizing process of individuals and entities interacting with each other that involves constant adjustment by its participants.