and vice versa!
At 02:18 5/03/2008, you wrote:
Jim Devine writes:
>> I don't know much about "Masonomics" (having thought that it was just
>> a more extreme and puerile version of the Chicago school). But the
>> slogan saying that "Markets fail. Use markets" is like Stalin saying
>> "Central planning fails. Use central planning." It's crazy. If a GMU
>> insider thinks that represents their point of view, it's quite
>> telling.
I am not sure why you jump to such a harsh conclusion based upon a
bumpersticker, especially when you show no inclination to understand
what the bumpersticker is supposed to reflect, If you had clicked
on the link and read the short article, you would have read:
---------
"Somewhere along the way, mainstream economics became hung up on the
concept of a perfect market and an optimal allocation of resources.
The conditions necessary for a perfect market are absurdly
demanding. Everything in the economy must be transparent. Managers
must have perfect information about worker productivity and
consumers must have perfect information about product quality. There
can be nothing that gives an advantage to a firm with a large market
share. There cannot be any benefits or costs of any market activity
that spill over beyond that market.
The argument between Chicago and MIT seems to be over whether
perfect markets are a "good approximation" or a "bad approximation"
to reality. Masonomics goes along with the MIT view that perfect
markets are a bad approximation to reality. But we do not look to
government as a "solution" to imperfect markets.
Masonomics sees market failure as a motivation for entrepreneurship.
As an example of market failure, let us use a classic case described
by a Nobel Laureate, which is that the seller of a used car knows
more about the condition of the car than the buyer. Masonomics
predicts that entrepreneurs will try to address this problem. In
fact, there are a number of entrepreneurial solutions. Buyers can
obtain vehicle history reports. Sellers can offer warranties. Firms
such as Carmax undertake professional inspections and stake their
reputation on the quality of the cars that they sell.
Masonomics worries much more about government failure than market
failure. Governments do not face competitive pressure. They are
immune from the "creative destruction" of entrepreneurial
innovation. In the market, ineffective firms go out of business. In
government, ineffective programs develop powerful constituent groups
with a stake in their perpetuation."
-----
Personally, I would put it this way. No matter how many flaws in
markets you can identify, the existence of such flaws do not
logically lead to the conclusion that the absence of markets (i.e.
government intervention) would lead to a preferable result.
David Shemano
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