Chapter Five, Part VI

A giant flock of starlings moves purposefully through the African sky keeping its shape and speed while sweeping smoothly around a tree. From above, a bird of prey dives into the flock. As the starlings scatter, the flock seems to explode around the predator, but it quickly reassembles itself. As the frustrated predator dives again and again, the flock breaks up, re-forms, breaks up, re-forms, its motion creating an indecipherable but beautiful pattern. In the process, the hawk becomes disoriented, since no individual starling ever stays in the same place, even though the flock as a whole is never divided for long.

From the outside, the flock’s movements appear to be the result of the workings of one mind, guiding the flock to protect itself. At the very least, the starlings appear to be acting in concert with each other, pursuing an agreed-upon strategy that gives each of them a better chance to survive. But neither of these is true. Each starling is acting on its own, following four rules: 1) stay as close to the middle as possible; 2) stay two to three body lengths away from your neighbor; 3) do not bump into any other starling; and 4) if a hawk dives at you, get out of the way. No starling knows what the other birds are going to do. No starling can command another bird to do anything. The rules alone allow the flock to keep moving in the right direction, to resist predators and to regroup when divided.

It’s safe to say that anyone who’s interested in group behavior is enamored of flocking birds. Of all the hundreds of books published in the past decade on how groups self-organize without direction from above, few have omitted a discussion of bird flocks (or schools of fish). The reason is obvious: a flock is a wonderful example of a social organization that accomplishes its goals and solves problems in a bottom-up fashion, without leaders and without having to follow complex algorithms or complicated rules. Watching a flock move through the air, you get a sense of what the economist Friedrich Hayek liked to term “spontaneous order.” It’s a biologically programmed spontaneity—starlings don’t decide to follow these rules, they just do, But It is spontaneity for all that. No plans are made. The flock just moves.

You can see something similar—albeit much less beautiful—the next time you go to your local supermarket looking for a carton of orange juice. When you get there, the juice will be waiting, though you didn’t tell the grocer you would be coming. And there will probably be, over the next few days, as much orange juice in the freezer as the store’s customers want, even though none of them told the grocer they were coming, either. The juice you buy will have been packaged days earlier, after it was made from oranges that were picked weeks earlier, by people who don’t even know you exist. The players in that chain— shopper, grocer, wholesaler, packager, grower—may not be acting on the basis of formal rules, like the starlings, but they are using local knowledge, like the starlings, and they are making decisions not on the basis of what’s good for everyone but rather on the basis of what’s good for themselves. And yet, without anyone leading them or directing them, people—most of them not especially rational or farsighted—are able to coordinate their economic activities.

Or so we hope. At its core, after all, what is the free market? It’s a mechanism designed to solve a coordination problem, arguably the most important coordination problem: getting resources to the right places at the right cost. If the market is working well, products and services go from the people who can produce them most cheaply to the people who want them most fervently. What’s mysterious is that this is supposed to happen without any one person seeing the whole picture of what the market is doing, and without anyone knowing in advance what a good answer will look like. (Even the presence of big corporations in the mirket doesn’t change the fact that everyone in a market has only a partial picture of what’s going on.) So can this work? Can people with only partial knowledge and limited calculating abilities actually get resources to the right place at the right price, just by buying and selling?