Entry 2308, on 2023-12-20 at 12:34:51 (Rating 3, Politics)
In the past I have been very suspicious of anyone extolling the virtues of "the market". I mean, it was always seen as a warning sign of a fairly extreme ideology, especially in terms of economics, but extended to other areas of life as well. I still think there are people who promote market driven approaches who are very one dimensional, and might be either motivated by greed or doctrinal belief to "spread the word", but on the other hand, I do kind of get it now, too.
Market driven systems, just like those based on other concepts, have their advantages and disadvantages, of course, and a pure market approach is arguably not much better than any other pure approach, but I think the automatic rejection of them is misguided.
I should, at this point, briefly discuss what sort of market approach I mean. In the bigger picture, I see these as systems which respond to pressures from the end users. So in a market for smart-phones for example, it might be possible for one manufacturer to demand a premium price because that's what purchasers see as appropriate. Whether the extra cost is worth it or not is debatable, but in a market approach whatever works is justified.
Of course, I am talking about Apple in general here. All of their products are, superficially at least, more expensive than most of their competitors, but they still succeed despite that (market capitalisation over $3 trillion). Customers see value and respond by being prepared to pay the extra. Is the extra cost justified by objective criteria? Who knows, but it doesn't really matter because it works.
The broader concept of markets works outside of product sales too. We now have a situation where many mainstream media outlets are massively less popular than alternative sources, like podcasts, YouTube videos, discussion sites, and social media. In past posts I have discussed how Joe Rogan's podcast has a far greater audience than CNN, and in another recent podcast called "Triggernometry" I heard how that has far more listeners than a mainstream magazine which chose to criticise it.
The internet has expanded the mechanisms available for distribution of information, and in that new market environment the consumers have exercised their freedom of choice to reject legacy media, mostly because it has taken the woke path of identity politics.
So people who see markets as being abstract and faceless mechanisms controlled by a few elite couldn't be more wrong. What they are really thinking about there are the alternatives. Markets are the result of the accumulation of many individual choices. The option is to have central control (for example of pricing, availability of information, etc) which comes from a single source, such as a government, and who wants that?
Well, to be fair, there are places where some degree of central control is necessary, because that famous concept from economics, externalities, has an effect, and markets also only work "properly" in an environment where there is no monopolistic opportunity to warp the natural preferences of the market participants.
So people who say "let the market decide" are making a very valid point, but they do need to be aware of those two factors. Markets only work well when they are set up using a fair set on constraints, and when extra factors which might not normally be part of the system are factored in.
There is one other point I should make here too. That is that to get a rational outcome from a market it is usually assumed that the participants themselves are rational. I think it is generally accepted now that most people do not act rationally and in their own objective best interests. But in fact, this might not be as important a factor as might be first assumed, because the process often known as "the wisdom of crowds" can give good results even when individual knowledge or decision making is faulty.
Also, even if the market makes the "wrong" decision, it is still a decision based on a common view, and should be respected based on that. Looking at it this way, democracy is a market mechanism, because trends percolate up from the masses instead of being imposed from above.
So I say the government should do as little as possible beyond creating an environment where market actors can provide what is demanded. It is a debatable point whether they should go beyond that and act in cases where game theory demonstrates a likelihood of adverse outcomes such as those which arise from "tragedy of the commons" situations.
I guess we could say that government actions are partly market driven forces too in democracies, because the "market" (voters) decide which governments are successful, but that is far from an authentic example.
So I could conclude by saying that trusting the market is like trusting the majority view, or trusting democracies, at least in situations where markets are operating efficiently and fairly. I know that markets have their problems, but the alternatives are much worse.
Comment 1 by Anonymous on 2023-12-21 at 23:06:21:
You have some quite strange ideas about what a market is according to this stuff.
Comment 2 by OJB on 2023-12-22 at 13:27:36:
I was trying to explore the bigger issues, of the wider meaning of the word. And to show how markets are actually a democratic principles.
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