I guess I've already written about this sort of thing, but it drives me crazy when people talk about this "law" of supply and demand like it is some objective measure of an eternally just, good, wonderful mechanism that provides sublime order.
Mercifully, there has been a lot of push-back concerning market fundamentalism in modern political economy. Modern market fundamentalism, often synonymous with neoliberalism, is the belief that markets are generally perfect and will provide spontaneous order over time - through various homeostatic mechanisms and price signals - if they are left alone. The idea is that a society of self-interested actors will aggregate optimal social outcomes, via the invisible hand, if they are left to act freely in the market with minimal government intervention, which is something Adam Smith himself had doubts about. Again, mercifully, this attitude is increasingly being marginalized by a growing group of actually-rational heterodox economists, though it continues to hold sway in the mainstream, due to its appeal to concentrated capital.
But the concept of supply and demand still manages to escape scrutiny more often than not. That is because as a general mechanism it does a decent job at solving the information problem in economics...on a mechanical level. If you are merely setting out to do economics, that is, solve the issue of how to distribute goods in a society without needlessly complicating things or wasting energy on convoluted bureaucracies and procedures, supply and demand works as a useful distributing component, something that produces useful mechanical functions when combined with other processes.
If a lot of people want something, and you only have a little of it, you raise the price and see how much people really want something, how much they are willing to pay to get it. It is an elegant way to distribute goods. However, when you begin to talk about distribution as connected to other factors, and over time no less, it ceases becoming a mechanical issue; it becomes a moral issue.
That's because when it comes to wealth, power, and accumulation, we are more like animals than these posited rational, self-interested machines. When you begin to study distribution over time, you have to go beyond the mere isolated mechanism, because we still act like animals with our economic goods.
Accumulated wealth and power have a sticky quality to them. They clump. They stay. And you always have a proportion of people in a society that want more. Many collectivist societies do a good job at reigning in these types, though there are limits, while many individualist societies tend to let these types run roughshod and accumulate.
You hear "economics" used a lot more than "political economy" these days - though the latter term is making a comeback among lefties - for good reason. Over the last century organized capital has been working diligently to obscure the moral dimension of economic distribution. The idea is to posit supply and demand as some objective organizing principle that we are subject to, which implicitly replaces the moral dimensions of political and economic decisions, and sheathes the looting in a glistening gloss of false objectivity.
So more simply, you have some health insurance rep parroting off the cliche that it is the law of supply and demand that is determining their exorbitant prices and you'd better get used to it because...markets. But what he is really saying - while obscuring the true nature of what he is saying with a false symbol of objectivity - that his industry is run by a bunch of selfish bastards that have gained too much economic power. This is what makes health insurance particularly immoral in its current state (and plenty of other things infiltrated by markets). If you gain enough power to monopolize a given economic good that everyone needs - in this case health care - you can charge as much as people can possibly pay, sometimes more.
More fundamentally, and speaking in moral language, the concept of supply and demand itself communicates a selfish impulse. It is generally thought to be messed up of someone to sit in a desert selling dying travelers bottles of water at cutthroat prices, because our moral drives respond to context: that is, depending on the situation, we can act in our own self-interest or selflessly. Supply and demand says this: if you really want something I have, I can take as much as you are willing to give me for it. It reflects a set of values.
Posited as an objective fact, this principle seeks to multiply instantiations of itself across the land. Adopted throughout culture, mutual self-interest fastens an iron band around a society which elicits a dependable behavior. It is in this way that an economic structure develops in which energy moves within a society.
Everyone must take from someone else. "How much can I get?" becomes the guiding instinct. Systematized through law and institution, this principle establishes a highway in which goods flow. However, over time objects of pleasure gather at the polar end of power, while objects of pain, or simply the absence of objects of pleasure gather at the polar end of impotence. Why?
Now of course human beings are many more things than mere selfish robots. Just as people can behave as the exalted capitalist, people can also behave as the - I'm going to say it, the bad dirty curseword - communist. Families, friends, and lovers share with another or even diminish their own selves to give to the ones they love and care about. Strangers do it to each other too.
However there is a negative side to human behavior. People also hesitate to share with those in outgroups, or those less close to them. Some can go so far as to deprive or even seek to harm those they fear or don't understand. For many, people fear losing what they have acquired. And so our tribal nature circulates wealth within closed circuits, which accumulates through fear and ambition in a select few families, passed down over generations. Wealth and power concentrate because of individual differences and the behavior of people and wealth in concentrated groups.
There is a reason libertarian capitalists and many white conservative males call for freedom. They call for freedom to exercise the power they already have. "Free markets" is code for the rule of powerful businessmen.
This structure takes its shape from the aggregate of mass psychology and the exercise of political and economic power. This state of affairs will continue until enough people begin to think differently and act on it.
