States v. Markets? - 5 comments
Great post from Shuggy here: "The bank crisis and the left":
You didn't ask but you're getting it anyway: my advice? The left - or at least some of it should a) calm down a bit b) stop conflating issues. I won't link them all because no doubt you've come across the sort of thing I'm referring to: this bank crisis is the end of "kamikaze capitalism", "the end of the neo-liberal world order", the refutation of the "unbridled free-market", it represents the nadir of the "Hayekian/Friedman axis of evil"... Ok, the last one was made up but you know what I mean. Naomi Klein - admittedly not one of the left's most subtle thinkers, to say no more than that - even went as far as to suggest that this financial crisis is for neo-liberalism what the fall of the Berlin Wall was for communism. Correction: she said it should be. Very silly, I hope you agree.Meanwhile, here's Stumbling and Mumbling on Markets as public goods:
The financial crisis is a failure of markets which shows the need for state intervention. The crisis exists because markets are insufficiently developed.These two statements seem contradictory. But they are not. They are consistent. Markets are themselves public goods. And public goods can be under-supplied by the market.It's along the same lines as the debate I had (well, I left a comment; still waiting for a reply...) at the LRC's Left Economics Advisory Panel blog, over their "Markets are stupid" post. Virtually nobody - even in the best of economic climates - accepts the straw-man that markets are entirely self-regulating - that they can work without any legal framework, regulation, or intervention at all:
[...] the market is incapable of producing rational outcomes even when its own life depends on it. Judged by society's goals it fails further still and it does so because it is the perfect breeding ground for social traps, because it prevents co-operation and because society's values cannot be represented in monetary exchanges directed by selfish individualism and the profit motive.That markets can work should be obvious to almost anyone who wears clothes, has food in their kitchen, or who has traded something they didn't want for something they did. That these markets have somehow to be created, and sometimes need rules and interventions doesn't seem to me to represent any fatal flaw in that kind of system.
Economists are generally concerned with enabling the existing economic system to work better: by identifying areas where individual markets fail, and promoting policies that their models and analyses suggest will enable them to work better. They might also seek to create markets where economic activity was previously absent or seized-up. They aim to do all this in the most unobtrusive way; the simplest way; the way least likely to have unforeseen, and possibly unwelcome or contradictory, consequences).
Saying that markets cannot ever work, and that much greater state intervention is the alternative (or, indeed, vice versa), is a bit like a mechanic suggesting that instead of him looking at your transmission, you should buy a tank instead.
It's an attitude that distinguishes social scientists from propagandists.









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