According to evolutionary psychologists our brains have not evolved to understand market processes. Free market is not intuitive for our brains. Human brain evolved to solve adaptive processes characteristic for hunter-gatherer societies. Our paleolithic brains are not prepared to solve complex market processes.
- Lived in small groups of 50-150 people at most,
- Lived their whole life within 75 km radius,
- Trusted only their kin,
- Cooperated explicitly (directly), barter exchange,
- Very rarely cooperated with strangers, did not trust the strangers,
- Had a very high (short) time preference,
- Did not invest long term, did not have a need to save,
- Had their knowledge within a hand’s reach,
- Saw causes and effects as very close to each other,
- Simple production, comprehensible technology.
- Understood life as a zero-sum game,
- Used aggression toward other humans as a valid survival strategy.
On the other hand the market which basically emerged only some hundreds years ago is characterised by:
- Large group participation, complex organizations,
- Long distances,
- Cooperation with strangers, trust toward strangers,
- Implicit (indirect) cooperation, middlemen, means of exchange,
- Low (long) time preference,
- Long term investment, savings,
- Dispersed knowledge,
- Space and time distance between causes and effects,
- Roundabout mass production; incomprehensible technology,
- Win-win situations,
- Non-aggression principle.
So what does it take to understand the market? Certainly not intuition, nor statistical observation (empiricism). The only way is logic and deduction i.e. praxeology.