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Then the Gods of the Markets Tumbled
Early on in one of my harder math courses at the university, the professor stood up in front of the room, writing on a chalkboard. He proved that all possible problems of the class we were studying had a solution. He was quick to point out though, that no one was guaranteeing that you could find it. I spent the rest of that semester increasingly frantic as I couldn’t find those solutions.
All too often, when presented with a problem, conservatives will wave our hands and say “the market will provide a solution.” The certainty of our inevitable triumph absolves us of any need to bother with anything in the meantime. And make no mistake; I believe in the inevitable triumph of market forces as much as anyone. But we should spend a little time thinking about what all that implies.
The market is slow. Communism has been a failure wherever it’s been tried, but somehow we’ve had three generations of murderous scumbags ruling in North Korea. That regime can’t last forever but it has lasted for several decades. From the moment the Soviet Union was born out of revolution it was doomed. That didn’t prevent the Holodomor, or save uncounted multitudes from the gulag. Quite a lot of awful things can happen while we wait for the market to correct itself.
The market is unpredictable. The New York Times (a former newspaper) is still making money. Isn’t it obsolete? Shouldn’t a print medium have gone out of business by now? Maybe; word of them having layoffs always brings a smile to my face. Maybe the market is still correcting and we’re just waiting until they lay everyone off. Maybe there’s still enough value in what they create to pay to keep the doors open. It’s useless to wait for the market to solve that problem if the market is balanced already.
The market is chaotic. There’s still good money to be made in a dying industry if you play your cards right. And you can still end up bankrupt in an up-and-coming one even if you did everything right. The only way that the market rewards or punishes people is through money. There’s a lot of noise in that signal. One shouldn’t attribute too much virtue to someone who succeeds, or too little to someone who doesn’t.
The market is amoral. Not immoral, just completely indifferent. Someone was telling me about the difficulties in returning their rented cable box. The company makes money if they can charge you for it, and they’re already losing you as a customer. It’s in their economic best interest to abuse that process. Makes life worse for you the consumer, but there’s very little market incentive to change.
Some problems are resistant to market forces. Smoking weed is pretty much a dead end in terms of making money. People still do it though. Definitionaly market forces can’t demand every single person do one thing; the people have to be responding to their own incentives and making their own choices. People are chaotic; they won’t all choose the same things even given exactly the same circumstances.
Statistical effects don’t balance out in individual cases. If I lose my job maybe I don’t get another. Not because I’m not qualified or because I didn’t plan sufficiently. Statistically speaking, some people get the shaft. In a similar sense, you’ll find occasional people on this site who benefited from Obamacare. The thing is a train wreck and ruining the economy and all that, but they rolled the natural. Maybe I would have gotten another job, maybe Obamacare’s implosion would leave them worse than before. Maybe we die before that happens; there’s no karmic balance sheet that has to add up.
What does all that add up to? Before you tell me the market will solve a problem, stop and consider it. Will it solve the problem quickly, or slowly? What immediate problems is it generating while we’re waiting, and how serious are they? Is the market pointing towards the solution you want it to? If it’s not, what incentives do you have to adjust so it is?
And for heaven’s sake, show a little empathy when someone gets kicked in the teeth.
In “I imagine you already know this” news, the title is taken from the poem The Gods of the Copybook Headings by Rudyard Kipling.
Published in Economics
This is well stated and necessary for the discussion. If some other system of economics produced more prosperity, it would still be preferable to go with the free markets because it is free.
Hmmmm… I blame them for many of our current issues.
After all, “What are you, communist?” is our cold-war version of not being American enough, right?
I don’t blame the Poles for that; it’s not like we won the Cold War just so they could continue to be under Russian domination.
While “Bernie Sanders in cowboy boots” is pithily hilarious, the states Gary mentioned – Britain; Ireland; Canada; Germany – are still free countries in important respects. Especially fellow Anglosphere nations.
The UK, Ireland, Canada, Germany, and the US all clock in at “mostly free” on Heritage’s Index of Economic Freedom – Ireland, Canada, and the UK now beating out the US. And economic freedoms aren’t the only freedoms. Freedom to worship (or not) as you choose, to marry (or not) as you choose… Even speech is fairly unrestricted in those countries (especially Anglophone countries), despite being more restricted than it is in the US.
This doesn’t mean there’s no difference, or that the American way (even if it’s honored more in the breach than the observance at this point) isn’t better. But there really was a reason for freedom-lovers to be happy, for instance, when the Berlin Wall came down: while that wall stood, one side of Germany really was dramatically freer than the other side.
Before we get all dewy eyed for European style social welfare-ism it should be pointed out that the economic history of much of Europe/EU is checkered, at best. EU unemployment is currently running around 9% and almost without exception recovery from the Great Recession has been slower than the US. And for every Germany/Sweden where the system seems to do OK, there are two Spain/France/Greece that are economic basket cases.
What’s his line? “It is the curious task of economics to show man how little he knows about what he imagines he can design.”
It’s an excellent principle. When we rule out the possibility of planning an economy, however, it’s useful to remember that local knowledge doesn’t imply perfect actions either.
In my corner of the midwest, immigrants from ex-iron-curtain regions tend to be particularly anticommunist.
Agreed; to the extent that a market isn’t free, that market is less efficient, less prosperous, and less likely to be just. It’s much better if those markets are free.
The point I’m trying to make with the post though; even in a perfectly free market the details of how we get from problem to market solution are important.
Europe is not thought of a positive example on the right, yet it is talked about all the time in comparison to America. I don’t see why China is not discussed. I don’t think the China model, whatever that is, would be good for the United States but it needs to be studied. It is probably going to be the dominant model on how to organize an economy, if it isn’t already.
Thank you for your kind words.
In my limited experience with business books, they’re always eager to sell you their solution. Consequently the wax poetical about the failings of other systems and say nothing at all of the weaknesses of their own model.
I don’t suppose you know of a book which takes an honest look at the business fads of the last century, evaluating strengths and weaknesses dispassionately? I’d like to read that book.
Actually, it depends even more: on which industry, and which state in the US.
From acquaintances, I’ve heard that it’s easier to start-up and run a software company in many European countries than in any of the big software states. It’s certainly easier to be a doctor in private practice. Manufacturing may certainly be different, especially since numerous agreements apply on top of the labor laws.
I see it slightly differently:
Europe has nearly universally agreed to a big-state model. This means they’ve taken their foot off the brake and are throttling toward ever more perfect society. This also results in continuous wild swings and forced changes – stasis is not what I would call having to re-invent your compliance department every five years. And it turns out to be going much too fast for many peoples’ preference.
In contrast, the US is built on a mountain of almost-big-government kludge so dense it’s nearly impossible to move.
For example, for all the scariness of Obamacare, it did very little to actually change the completely illogical structure of our healthcare system. Most people on employer-based care before are still on it; most people on Medicare before are still on it; most people in the individual market are still buying their own plans.
We eliminated “welfare as we know it”; but that welfare is now known as “Medicare disability”.
We can’t even privatize the Post Office, as several western European countries have done.
The regulatory swings every time the presidency changes parties are certainly whiplash-inducing; but at a legislative level, the US is actually much more steady (and stodgy) than most of Europe.
This is what 5 min of Google yielded:
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I heard an author of a book on China ( recent Adam Carolla Podcast) say there’s more communists at Berkeley than in the Chinese government. It does seem to be from my extremely limited understanding a complex mix of authoritarian state control, free market capitalism and a heck a lot of cronyism. It’s a super diverse country with over a billion people with many customs and societal views most westerners don’t understand. It does seem to be one of the more successful emerging markets in recent years. If it’s built on a house of cards is something I often wonder about.
Does the organization resemble Coase’s “superfirm”?…
I know what I’ve heard – “socialist market economy”, state-controlled finance and major industry, insecure property rights, too much state oversight but also inadequate safety regulation and disclosure requirements…
And also that emergency medical care somehow slipped through the central-planning cracks and is transparently priced (this from @amyschley, who received treatment in a Chinese ER).
You still get the same issue as the muslim thing… trojan horses using earnest freedom seekers to gain entry to a country that progressively asks fewer ideology questions.
Just pointing out to the original commentor that not all immigration restrictionists are unaware of the impact eastern europe has had on our country.
And an absolutely must read poem from the same pen that gave us “If.”
Indeed, even a single businessman or person contemplating a specific new local business has to guess and succeeds if he guesses well and adjusts to what he got wrong. Summing that over even a modest sized city is impossible.
I think those links actually prove my point. There are some briefs mentions of China every so often, and in them China is lazily brushed aside.Whether it is on demographics (which really aren’t bad) or a property bubble (which shows no signs of popping soon if it is a bubble nor does it seem that China would not be able to handle it), there seems to be an excuse for why nobody should give serious thought to China. On the contrary, the fact that there are these sophomoric articles on China demonstrate why it is the paramount threat to the United States. The United States may not even have the ability to deal with the threat.
Maybe you don’t need of the things that Western political philosophers take for granted. Maybe they were all wrong.
If China becomes the most powerful nation, doesn’t that kind of prove that much of Western political thought is wrong? Aren’t there implications to this that no one on the right wants to admit?
Only if you think most powerful is the definition of best. Spain was the most powerful country in Europe in the seventeenth century; does that mean Spanish philosophy and political structures were the best at that time?
As for China, you’ll have an argument that the Chinese political system is superior to the American one when there is more immigration than emigration.
Well, it was only 5 min of Googling. I suppose I could spend more time and lengthen the list but no doubt you would find additional reasons to dismiss it.
Edit: this line of thinking is quite similar to the Japan scare of the 80’s. They’re flooding our market with their cheap cars! They’re buying up all our real estate! Books were written on how Japanese managed corporatism was the wave of the future. Where are those prognosticators now?
Like Amy, I don’t see power as the ultimate good Western political thought must pursue, so China becoming powerful does’t prove that thought wrong. Do you have in mind other conservatives who do think America’s superpower status is inextricably linked to America being the best test-case for Western political philosophy?
As for secure property rights… Well, figuring out who’s responsible for what, who gets to use what when, etc, is important to getting things done, and property rights are an efficient way to do that in a free society.
Members of a firm may coordinate use of property without appeal to rights over it – in general, it’s not efficient to try to allocate property rights among coworkers over the office stapler, for example. Treating all activity that goes on within a nation as happening in one giant firm has always been appealing to some people. It’s not appealing, though, to those who reject a political order where every citizen is at the disposal of the state. If you want to leave people basically free to determine their own lives in free cooperation with others, the efficiency of robust property rights seems hard to beat.
In some way, they were the best. The fact that they managed to organize into what was then the most powerful empire suggests that there was something right about the Spanish political system. You can’t divorce their preeminence from their political system. I find it hard to believe that they got to where they were by chance.
Have you studied Spanish history though, to understand why they attained such preeminence? It actually was by chance – finding the incredible gold and silver deposits in South America + dynastic marriages that put the Hapsburgs in control of something like 1/3 of Europe.
Their policial system then proved unable to handle that wealth and power. Their gold addiction ruined native Spanish industry for generations to come. Why make what you can buy? That dynastic meddling? Generations of inbreeding ruined the monarchy.
If China is the most powerful state, don’t you think that will negatively affect your standard of living and the standard of living of everyone that you know? Conservatives often criticize the left for thinking that the US can pull back and nothing bad will happen while a social democratic order takes hold in the US, but many on the right are just as naive about China.
Why should they leave the US alone? Indeed, they already attempt cyberattacks on the US and they seek to make the Yuan the global reserve currency at the expense of the US dollar. Even if they did nothing, the weight of their financial transactions would make everything more expensive for US consumers. US treasury bonds would be less desirable. Cuts would have to be made to infrastructure, schools, the military, etc. China will not leave the US alone while some on the right cling to traditions and others on the right debate the musings of philosophers.
We’re debating the best way to structure our own society and what sort of future it will have. You seem to be saying that China will doom it anyway. What of it? Do you have a solution to this? Is China unbeatable? Is it necessary to beat China anyway? If so, how? Economically? Socially? Militarily?
Chance was not the reason that the Reconquista was successful. Chance was not the reason that Spain conquered so much of the New World so quickly. Chance was not the reason that they set up colonial administration to exploit their conquests. There is a lot that didn’t happen due to chance. Maybe the discovery of the gold and silver was chance, but even if they didn’t discover it they still would have held a vast empire in the New World.
As to the aftermath of all this, I don’t think it can be blamed on their political system. It can be blamed on the poor choices of the people within that system, but nothing within the political system compelled them to make those choices. Would you blame the US political system for Vietnam? Would you blame the US political system for Afghanistan or Iraq?
Absolutely.
Ditto.
I wasn’t referring to anyone here.
Do I have a solution to this? No, but why does nobody seem to want to talk about a solution? Why do you think that it is not necessary to beat China?