Tuesday, June 19, 2007

Planning, Financial and Otherwise

No one ever walks into a financial planner's office and asks for an expensive, complicated, and difficult to maintain financial plan. What he wants is something simple, effective, and as inexpensive as possible.

The same is true for every other kind of plan. Business plans, military plans, and education plans are all ideally simple, effective, and inexpensive. Another way of saying this is to describe the plan as "economical," in the sense it uses a minimum of the resources required. These resources might be time, knowledge, or money, among other things.

Remarkably, more than just human plans seem to be organized with the goal of economy. Consider the human mind. It works with a surprisingly small amount of information. Our senses do not completely perceive reality as it is. Rather, our senses detect only those facets of reality that aid our survival. You could say our senses operate economically.

Trade extends the idea of economy to the relationship between individuals. In a trading economy, individuals can achieve a great deal of success with a surprisingly limited amount of knowledge. All that is necessary is the entrepreneurial sense to detect a trading opportunity, the freedom to trade, and a price system that reflects unbiased information.

To return to our initial argument, we should never ask for an economic system that is expensive, complicated and difficult to maintain. The more we allow market forces to work, the closer we come to the ideal of an adaptable system that operates effectively with widely dispersed and individually limited knowledge.

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