John, in one of your previous emails you said … “that is the free market my friend, you can’t have it both ways.”
I don’t want it both ways. Unlike many “free market” Republicans who naively claim or believe that less government will solve ALL of our problems. I don’t believe de-regulation is the answer to “everything.” I don’t think the so called market is perfect or even necessarily good. the market just is what it is, no moral judgment can be made either way. the market embodies simultaneously both the good and the evil inherent in life.
I acknowledge that the best the free market can do is deliver imperfect results, just like life. We have beautiful sunsets and we have earthquakes. We have white sand beaches and we have tsunamis. Should we try to get rid of the earthquakes and tsunamis? No. we need to understand them and learn to live with and around them. the same is true for so called “market failures” which are really just “market features.”
The best the market can do is provide an institutional and social arrangement that promotes freedom and liberty and peace – all of which maximize social welfare. Note that there was never a world war that was not started by a government. the private sector never dropped an A bomb on Nagasaki nor did it build gas chambers during WWII.
Like I said before, the market is just like “life”; it isn’t fair. it is unpredictable. it is subject to ups and downs. Depressions and manias. And sometimes life isn’t “rational.” Sometimes life is impossible to figure out. Why do good people get struck by lightening and scumbag Wall Street bankers live in mansions and buy maseratis?
The market is part of life and it entails all of the positive and negative features of life including radical uncertainty and mystery. Markets can’t be forecast or “determined.” They have business cycles and can experience unpredictable asset market bubbles and busts. Markets naturally entail creative destruction and failure and they lead to income inequality and social inequality. Life and markets aren’t fair and what makes us think we can make them fair – any more than we can make the world fair?
That leads us to the BIG question of whether human beings or more precisely government politicians, bureaucrats and expert policy makers can (or should) fix so called “market failures” (that I claim and argue are just market features). Can we make life more fair? can we “level the playing field.” Even if we can’t answer those questions for sure, do we have a moral and social and ethical responsibility to try to fix market features we don’t like and that we assume are “failures”?
do we have a responsibility to “we” give everyone who is willing to work hard the opportunity for a college education and a good job? By that I mean should we use every means at our disposal, including the Federal Government, to make society fair?
If you say yes, then You my friend are the one who wants it both ways.
You want the benefits of free market capitalism without the costs and the inherently unsavory features (e.g. unpredictability and unfairness) that necessarily go together with free markets. Markets have warts. They aren’t perfect.
The problem with many conservatives is that they naively assume that de-regulation is the answer to “everything.” Politicians have to have all the answers, so conservatives over simplify and claim that the government is evil and making it smaller solves everything. Of course, that is a bogus assumption, especially when conservatives promote institutions like the central bank and the military industrial complex, both of which create massive distortions in the market, leading to systemic dysfunctions that are then blamed on the market itself!!!
The GOP can’t have it both ways. It can’t say the market solves all problems and then promote market distorting institutions that actually prevent the market from working.
Once we understand that markets are inherently imperfect and unpredictable, as reflected in so called market failures (e.g. negative externalities, pollution, financial busts, etc), what should we do about these so called failures?
You see a problem and you say ‘aha’ this is proof that markets don’t work. Let’s fix it. I am saying before you fix the identified problem it might be wise to take a step back and evaluate whether or not we can or even if we should try to fix this “problem.” The reason for this is like I said already …. Many so called market failures are inherent features of markets and NOT failures.
what should we do about negative market features that are inherent to markets, like business cycles and financial panics and recessions that cause bankruptcy and unemployment (that often hit good people for seemingly no reason)? What should we do about pollution and how do we solve the problem of access to health care “for all.”
Free market capitalism results in income inequality, business cycles, industrial accidents, creative destruction, unemployment, asset bubbles and busts BUT free market capitalism is also the only system we know that can deliver sustainable growth and productivity gains (and associated wealth creation) over time.
If you want to get rid of the pollution and the creative destruction and the industrial accidents and the greed and the income inequality, well then you don’t get the productivity gains. You can try to reduce income inequality, but there is a price.
NO FREE LUNCHES
You can try to eliminate greed on Wall Street, but there is a price. You can offer universal health care, but there is a price. You can implement universal primary – and eventually – secondary education, but there is a price. BUT there will always be a price: for example in slower growth and/or lower productivity.
The political system as it is constituted in Europe and the US is bankrupt. pure and simple. We have promised too much and can’t deliver. We will have to default one way or the other on promises make for social security and medicare. Whatever we do will be a default by the government on promises it made to get elected. We are like $200 TRILLION in the hole in terms of contingent liabilities we owe for entitlement programs. If we raise the retirement age, that is a mini default of our promises.
You demonize the GOP, but our problems go way beyond the GOP. our problems are bipartisan, and go to the heart of our political culture which promises the moon and we believe it. shame on all of us.
Bottom line, “we” don’t get to have the benefits of markets if we get rid of the “failures.” You can’t have it both ways.
That is life. understand the market giveth and the market taketh away, sometimes unfairly and unpredictably. let’s get used to it.
If we try to inject predictability into markets or we try to inject fairness or equality … we do so at the risk of destroying what makes markets dynamic and sustainable and productive in the first place.
The inherent imperfections (or failures as some would have it) in the market are what give the market and society its inherent dynamism and sustainability and robustness. There is no way around it. to think otherwise is to naively believe in free lunches.
A perfect example is the central bank. the central bank was established to reduce economic and financial sector volatility. What it did is facilitate 2 historic boom and bust cycles, one in the 1920s through the 1940s and the other one still playing out today. There is no Great Depression without the central bank, yet our conventional wisdom says the Great Depression was caused by a failure of the Fed to intervene aggressively enough after the 1929 crash. Well, I can tell you we will find out how naïve that assumption is as we continue to go along and learn the lessons that conventional wisdom says we should have learned from the Great Depression. Sure, now we know the Fed can prevent a Great Depression, but what are the unintended consequences of doing so? We will find out and it won’t be pretty.
Another example is entitlement programs like social security and medicare. These are supposed to be great successes. The worked for 50 years or so. but we are facing the end of the road. These entitlement programs helped two generations but will destroy a civilization if we are not careful. At the very least, the solution to the entitlement crisis will necessitate a DEFAULT by government in one form or fashion. We cannot make good on promises. It is like we have lived in a bigger house than we could afford – we maxed out the credit cards and we tapped the home equity to the hilt – and now the market has crashed and bills are coming due.
Wake up Johnny boy! You can blame the evil GOP and the Wall Street a-holes for all of our problems, but really, it boils down to looking in the mirror.
Conservative GOPers and Progressive Dems will always have an excuse why things aren’t going as well as they promised. One says too little market, the other says too much. The reality is that politicians are a bunch of crooks and we shouldn’t trust them.
Free market capitalism is imperfect, but it is the best we can do to maximize social welfare. No matter how well intended or technologically sophisticated are the attempts to improve upon the natural results of the market, such efforts will inevitably result in a worse outcome thanks to the law of unintended consequences.
You want it both ways. you want all of the benefits of the market and at the same time you want to be able to plan, design and guarantee certain results that eliminate so called “market failures.” As soon as you try to eliminate market failures, you also eliminate market gifts like productivity, dynamism, innovation and wealth creation. Life is not either good or evil. It is always good and evil intertwined together, like yin and yang. if you try to eliminate the evil you also get rid of the good. that is the law of unintended consequences. We can’t fix the things we consider market failures without also undermining the miracle of markets – the ability to create “free lunches” for society. That is the ability to produce more wealth with same resource inputs. Government can’t create free lunches but the market can.
No comments:
Post a Comment