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Hayek's Spontaneous Order vs. Cartelization

The document discusses spontaneous order, cartels, and how Hayek's principle of spontaneous order applies to a specific situation. It provides definitions for spontaneous order according to Hayek, stating that market economies emerge from self-interested individuals not intentionally creating order. It also defines cartels as agreements between enterprises not to compete on price, product, or customers, resulting in higher prices and less choice for consumers. Finally, it analyzes a situation where a commodity's increasing supply led to higher instead of lower prices, along with meetings between members, indicating collusion in violation of spontaneous order principles.

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Shakthi Ratnakumaran
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51 views2 pages

Hayek's Spontaneous Order vs. Cartelization

The document discusses spontaneous order, cartels, and how Hayek's principle of spontaneous order applies to a specific situation. It provides definitions for spontaneous order according to Hayek, stating that market economies emerge from self-interested individuals not intentionally creating order. It also defines cartels as agreements between enterprises not to compete on price, product, or customers, resulting in higher prices and less choice for consumers. Finally, it analyzes a situation where a commodity's increasing supply led to higher instead of lower prices, along with meetings between members, indicating collusion in violation of spontaneous order principles.

Uploaded by

Shakthi Ratnakumaran
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

ANSWERS

1.
2.
3.
4.

c)
a)
d)
b)

Both a) and b)
True
None of the above
Feinbergs offense principle because individuals have the right not to be

offended
5. c)
Life, Liberty and Property

The term Spontaneous Order is usually used to describe the emergence of various kinds of
social orders from a combination of self-interested individuals who are not intentionally trying to
create order through planning. Hayek states that market economies are a spontaneous order, a
more efficient allocation of societal resources than any design could achieve. And in this way,
such an order is superior to any order a human mind can design due to the specifics of
information required. In a market economy, price is what allows every individual dealing with a
commodity, or its substitutes to make decisions based on more information than they could
personally acquire.
As per the Competition Act, 2002- Cartels are agreements between enterprises (including
association of enterprises) not to compete on price, product (including goods and services) or
customers. The objective of a cartel is to raise price above competitive levels, resulting in injury
to consumers and to the economy. For the consumers, cartelization results in higher prices, poor
quality and less or no choice for goods or/and services. Further, a cartel is said to exist when two
or more enterprises enter into an explicit or implicit agreement to fix prices, to limit production
and supply, to allocate market share or sales quotas, or to engage in collusive bidding or bidrigging in one or more markets.
The hypothesis of Hayeks spontaneous order notion is based on the fact that the spontaneous
interplay of the actions of individuals may produce something which is not the deliberation
object of their action but something else which in every way performs the same function, without
anyone having devised it.

When all of this is applied to the situation at hand, it seems to be that Magnifecium as a
commodity is being sold based on the availability of Faculty + Perseverance. MOM was aware
of the demand for Magenifecium from PPS so as to avoid importing the same at nearly double
the price. Because when the supply of Magnifecium in the year 2013 increased, the price should
have decreased to less than what it was when the supply was less in the previous years. Instead, it
increased and this coupled with the fact that MOM also held up to 4 meetings among the
members in the days leading up to the date of submission of the tender shows that there was a
certain amount of collusion among the members given the knowledge that the limited
Magneficium in the market could be used in their favour by distorting the prices. And therefore,
Hayeks principle of spontaneous order cannot hold true for the situation at hand and the
members of MOM are in fact guilty of cartelization.

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