It goes without saying that the financial services sector also has a lot to learn from a community farmers’ market. Mortgage-backed securities were far from transparent; the credit default swaps market was dominated by speculation, not value creation; and, of course, the Bernard Madoff scandal offers a case of outright fraud.That is from Jacob Harold of the Hewlett Foundation writing in Alliance Magazine. He notes that the financial crisis arose because of a failure to have well functioning markets - not because of their excesses. He argues that philanthropy needs more, not less market dynamics: " In fact, the financial crisis makes it all the more urgent to build a smarter, more open infrastructure that enables donors to make good philanthropic choices."
I agree, and I urge you to read this nice article.
Two features about markets I emphasize these days are learning and innovation. Each farmer watches and listens and tries over time to adapt to what the market wants. Some farmers will continue their “labors of love” (the new or unusual heirloom vegetable) that no one wants at the beginning and that is a money loser, but then one shopper will say to another the next week “Hey, you should try this strange thing; it goes really well with tomatoes.” Demand builds beyond the farmer’s capacity to meet it, and he thinks to himself “I’ve got to find a way to produce more of these at a cheaper price.” Meanwhile, other farmers start producing the same vegetable. This dynamic process enhances quality, introduces a stream of valuable variations, and keeps a focus on efficiency.
The economic and environmental crises we are facing cannot be addressed with marginal changes or more of the same. They require fundamental innovations and leaps forward in efficiency and cost. These come from a well-tuned, properly functioning market system like the one Jacob describes.