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« Short, sweet and to the point | Main | The FCC gets one right »

February 12, 2004

The key difference

It was said:

If we believe in the organizing power of the free market

The more accurate statement would be

If we believe the free market is all that is necessary

I don't.

Posted by P6 at February 12, 2004 02:52 PM
Trackback URL: http://www.niggerati.net/mt/mt-tb.cgi/365
Comments

I didn't think that you did. I meant "we" in the context of "libertarians", the topic of the article. I thought my intent was clear.

Posted by Phelps at February 12, 2004 05:10 PM

You were clear. I'm just making the point that you're not selling the concept you need to.

Posted by P6 at February 12, 2004 07:22 PM

That assumes that I need to convince you. I don't. I just need to get you to stop meddling in it. The free market runs fine without you. (That's one of the features.)

Posted by Phelps at February 13, 2004 10:31 AM

That assumes that I need to convince you. I don't. I just need to get you to stop meddling in it.

Convince me to stop meddling. How do I benefit?

Posted by P6 at February 13, 2004 10:50 AM

The free market runs fine without you. (That's one of the features.)

My objection is that, after a lifetime of reasearching economics with a strong neoclassical bias--which I still have--it's very easy to see that, by their own logic markets do not work by themselves. No mechanism exists for furnishing an efficient market for public goods because there is no way the provider can capture the marginal benefit of the good supplied. Similarly, the market ceases to be optimizing when barriers to market entry proliferate.

Opponents of antitrust action argue that "there is a substitute for everything," but there's already a classical analysis of welfare economics which defines how true that is. Answer: substitution is costly; a monopoly on Warren Zevon CD's is not nearly as costly as a monopoly on potable water.

Neoclassical economics is used to explain how markets self-correct. You are certainly welcome to tell me that economics is a pseudoscience, but if you do please do not tell me that markets self-correct and find optimal allocations of resources. That would be like an atheist embracing creationism.

PS: Yes, I am an advocate of free market policies. But, I know that markets cannot be used as a substitute for social preferences and they do not work for public goods or items for which there are perverse equilibria (e.g., forex)

Posted by James R MacLean at February 13, 2004 04:09 PM