Sunday, October 5, 2014

Free markets are difficult to sell

First, distinguish between correct and salable. Free market economics may be (is) correct but may not be salable. Put another way, free market economists as a group, or on average, get paid less than interventionist economists - who, maybe because of this are in the large majority. In a nutshell scientism leads to statism (HT: Pete Boettke). The kind of quantitative closed end economics that most economists do feeds nicely into the aspirations of politicians who have promised their constituents utopia. Free market economics is definitely a harder sell. 

The absolutely crucial point to make here is that it is precisely because free markets do not rely on the good intentions of individuals to achieve social benefits that they are superior to government policies designed to do what markets do automatically, and that, government policy being, by definition coercive, the presumption should be against them. The natural inclination of most people is to think that since free markets are peopled with individuals who intend only their own good, the government is needed as a corrective to these bad or indifferent intentions. But, this is to misunderstand in two ways 1. for free markets the right intentions are neither necessary nor sufficient to produce the "right" results - quite the contrary, acting in a self-interested manner most often produces socially beneficial results when the underlying institutional conditions are right - it is not from the benevolence of the butcher that we get our meat. and 2. for government policy good intentions are absolutely necessary but absolutely not sufficient. With the best intentions in the world governments, being basically limited human beings acting in a complex world, are very likely to fail. And most often they do NOT have the right intentions, because they predictably, even excusably' act in their own interest - Adam Smith pointed out individuals never spend other people's money as carefully as they spend their own, they have an incentive to inflate their budgets not economize on them - and to fake results to claim spurious successes - and there is no market feedback to check them. 

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