Why don’t we wonder enough about the marvels of markets? How do markets enable peaceful, productive, global cooperation?
In this episode, EconTalk host Russ Roberts introduces and reads his poetic tribute to the rich idea of spontaneous order, “It’s a Wonderful Loaf”. The poem and its animated video version are the backdrop for Don Boudreaux, Michael Munger, and Roberts to discuss the awesomeness of markets, and reasons that the concept is elusive for many people. Labor market consequences and price control disasters evidenced by Venezuela’s bare shelves are some of the topics that are touched on as common unintended consequences of government regulation.
1- Consider the examples of emergent order such as traffic, cities, language, law etc. What are other examples of “the result of human action, but not the execution of any human design” as described by Adam Ferguson in 1782? Are markets a unique example of this profound social process?
2- Is it the incredible complexity of markets or the human tendency to look for or assume conscious design around us that confounds the concept of spontaneous order? Or is it both? What single insight would you hope students gain from “It’s a Wonderful Loaf” when it is used as a classroom educational tool?
3- Does Roberts pose a strong argument in support of those who claim to believe in markets as a pricing mechanism yet still advocate for “all kinds of regulation”? What are other ideas for addressing those” left behind” by a market system?
4- How does Michael Munger’s argument for Basic Guaranteed Income support, complement, or allow labor markets and free trade to flourish?
5- If market processes were better understood, would market failures be dealt with differently? Would destructive price controls cease? What point is made to differentiate market imperfections as catalysts for innovation from market failures as negative outcomes to be remedied?
READER COMMENTS
SaveyourSelf
Jun 30 2020 at 10:30am
Alice, I see what you are doing now. Resurrecting old episodes for review and discussion. Good thinking. The old podcasts are a great resource. I’ve been craving a Mike Munger podcast anyway.
5a- If market processes were better understood, would market failures be dealt with differently?
Yes. But would the outcomes be better if markets were better understood? Possibly. Probably, even. But not certainly. Better understanding does not guarantee better design.
5b- Would destructive price controls cease?
Unlikely. It is unrealistic to assume that at any point in the future everyone will have excellent knowledge of markets, or even that those people who do have excellent understanding won’t use that knowledge to undermine markets or that they won’t make mistakes even if their intentions are good. Markets are complex systems, after all. And complex systems are complicated by their very nature.
5c- What point is made to differentiate market imperfections as catalysts for innovation from market failures as negative outcomes to be remedied?
This question hinges heavily on what is meant by market failure. A market is a summary grouping of individuals trading. For individuals to trade many assumptions must first be in place including individual freedom, justice, and stable individual property rights. So a “market failure” could mean a violation of the assumptions necessary for individuals to trade. It could also mean individuals’ rationing is displaced by some other form of rationing—rationing by government edict, for example. Either way, the end outcome is a reduction in the number of individuals voluntarily trading. The kind of “failure” we are talking about dictates the remedies.
4- How does Michael Munger’s argument for Basic Guaranteed Income support, complement, or allow labor markets and free trade to flourish?
A basic income guarantee (BIG) does nothing to allow labor markets and free trade to flourish. It is a redistribution scheme. And like all redistribution schemes, it effectively punishes working people and rewards those not working. Also it punishes success and subsidizes failure. Redistribution schemes undermine the incentives that allow labor markets and trade to flourish. The advantage of BIG over other redistribution schemes is that is conforms more closely to the rule of law ideal. Everyone has a percentage taken, and everyone receives a fixed amount. It’s equal under the law…or at least closer to that ideal than its alternatives. It’s not ideal, but it is an improvement from a philosophical standpoint.
3b- What are other ideas for addressing those” left behind” by a market system?
There are very few people who cannot offer something to a market. Quadriplegia and profound mental retardation would probably disqualify effective market participation, but not much else would. The majority of people “left behind” by a market system have simply chosen not to participate. That’s their choice. And because they chose, they are not victims and they are not left behind. They are hanging back. They can catch up whenever they want, barring barriers to entry like the minimum wage.
2a- Is it the incredible complexity of markets or the human tendency to look for or assume conscious design around us that confounds the concept of spontaneous order?
Conscious human decisions, in aggregate, produce spontaneous order. Conscious design is present in many of those individual decisions. A desire for conscious design is not the thing that confounds spontaneous order. The confounder in human systems is the overriding of individual agents in the system by other agents. Such interventions effectively reduce the number of independent agents acting in the system, making the system less complex, less adaptable, and less “spontaneous”.
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