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From: nrh@inmet.UUCP
Newsgroups: net.politics
Subject: Re: Re: The free market
Message-ID: <7800832@inmet.UUCP>
Date: Sat, 30-Nov-85 13:39:00 EST
Article-I.D.: inmet.7800832
Posted: Sat Nov 30 13:39:00 1985
Date-Received: Fri, 6-Dec-85 20:20:57 EST
References: <259@gargoyle.UUCP>
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Nf-From: inmet!nrh    Nov 30 13:39:00 1985


>/* Written  8:57 pm  Nov 27, 1985 by carnes@gargoyle in inmet:net.politics */
>/* ---------- "Re: The free market" ---------- */

Richard,  Thanks for the nice article:

>This posting is guaranteed to be a source of enlightenment, or your
>money will be cheerfully refunded.

You can keep every cent of MY money!  I found it most enlightening,
but perhaps a little misleading.

>>  1) Limited information is an essential characteristic of the real world.
>>     Saying the free market is flawed because not everyone knows everything
>>     is silly.
>
>But it is not silly to point out that, because of unequally
>distributed information, government intervention can outperform the
>free market in some situations.  I'll try to explain how this
>happens.

>First, I will let George Akerlof explain the point (from his article
>in *Quarterly J Econ* 84(3), 1970):  
>[....]
>  be a reduction in the average quality of goods and also in the size
>  of the market.  It should also be perceived that in these markets
>  social and private returns differ, and therefore, in some cases,
>  governmental intervention may increase the welfare of all parties.
>  Or private institutions [guarantees, brand-name goods, chains] may
>  arise to take advantage of the potential increases in welfare which
>  can accrue to all parties.  By nature, however, these institutions
>  are nonatomistic, and therefore concentrations of power -- with ill
>  consequences of their own -- can develop.

Sauce for the goose -- sauce for the gander.  It is *ALSO* true that
governments are nonatomistic.  The rest of your article depends, it
seems to me, on the idea that government's actions would be
benevolent and disinterested.  In your MODEL it is quite true that
government CAN act this way; Real world governments need not act this
way, of course, for the notion that a government CAN act this way to
be supported by your model.

On the other hand, you could have built fairies or elves into
the model and given them the same role.  You would then be safe
from accusations that "Fairies don't REALLY act this way", but the
model would not have carried the implication that government could
be depended on to help in the real world.

Note that I'm NOT saying that you deliberately misinterpreted
anything, merely that your model makes the presumption that the
government is not, in fact, acting the way governments do (for
example, that it's not imposing import quotas, or safety
checks that turn out to be  statistically unrelated to safety).

Given this presumption, yes, a government could aid a market
economy in assigning the prices of cars.  A similar statement on the
part of a rabid free-marketeer would be that folks in a free market  CAN
overcome free rider situations by simply choosing to be reasonable and
pay their share even though nobody can force them to.

In both the used-car situation and in the situation where government
is asked to make ALL private decisions, there's nothing wrong with
saying that a directed economy CAN outperform a free economy; the
government (and the population under it) simply has to be very, very,
very, very, very, very, very, very, very, very, very, very, very,
very, very, very, very, very, very, very, very, very, very, very,
very, very, very, very, very, very, very, very, very, very, very,
very, very, very, very, very, very, very, very, very, very, very,
very, very, very, very, very, very, very, very, very, very, very,
very, very, very, very, very, very, very, very, very, very, very, VERY
lucky.  You don't DEPEND on monkeys at typewriters to write
Shakespeare, neither should you depend on pencil-pushers in Washington
to have your interests, your information, and your dislikes as
perfectly integrated as you do.

And in free-rider situations?  If the government could be given ONLY the
power to deal with these, and only the power to do it well, then government
would indeed be my favorite Uncle.  'Til then....