We don’t have a laissez-faire system. The intervention of the federal government, as measured by expenditures, is growing. It is not a private system… - Kenneth Arrow

Nevertheless, when all due allowances are made, the coherence of individual economic decisions is remarkable. As incomes rise and demands shift, for example, from food to clothing and housing, the labor force and productive facilities follow suit. Similarly, and even more surprising to the layman, there is a mutual interaction between shifts in technology and the allocation of the labor force. As technology improves exogenously, through innovations, the labor made redundant does not become permanently unemployed but finds its place in the economy. It is truly amazing that the lessons of both theory and more than a century of history are still so misunderstood. On the other hand, a growing accumulation of instruments of production raises real wages and in turn induces a rise in the prices of labor-intensive commodities relative to those which use little labor. All these phenomena show that by and large and in the long view of history, the economic system adjusts with a considerable degree of smoothness and indeed of rationality to changes in the fundamental facts within which it operates.

I don't know which way human psychology will go wrong. We have a world in which there is uncertainty. There are new technologies. And one of the problems is that we do things today with a thought to the future. Any purchase is one for the future. If you buy a refrigerator you are making a commitment to the future, so that you have food to eat for the next ten years. That's a simple theory, one of many simple theories -- theories that people agree on and that don't, in a fundamental way, change. But every once in a while there is unemployment, and wages will drop, and there will be several different interpretations.

There is also one particularly needed elaboration of the model (which is not to say that it doesn't cry out for elaboration in many other directions). This is the relation between college filtering and on-the-job filtering. Once an employee has been hired, the employer can gradually draw on more directly obtained information to determine his productivity. However, this filtering may be costly. To the extent that the employer does filter and does so accurately, the Value of the college filter is reduced. The employer pays the average product of a group with given educational achievement only during the period before his own filter has become effective. Conversely, however, an increase in the college population will mean (and has meant) a depreciation in the quality of non-college students (this is not necessarily the same as a decrease in the quality of college students).