As a professor of economics, I feel obligated to publicly declare what I see as the biggest error that we economists promote to the world, using our authority as experts on economics.
I agree I’m much looking forward to some type case examples of when fact #2 has been taken as explanation for fact #1 and lead to misdirected interventions
I have come to understand that US universities are heavily left wing leaning but what macro economists are not introduced to the public choice theory??
Fully agree but it might be my English that’s not sufficient. I didn’t mean a brief introduction/overview of PC-theory What I meant was that any university degree in macroeconomics would introduce the student to the whole theory as to the Austrian school or Keynes economic theory or any of the other major theories. I’m an old man but this was how economics degrees were carried out in the early-90:s here. We had briefer introductions to let’s say Malthusian theory, Marxism and other more outdated theories but were considered to have left contribution to the field (personally I’d put Keynes, Galbraith and such on that list too now 😉)
Then, at the end of your studies, you could specialize further in any school/theory contemporary or as outdated as you wished. Is this, in your opinion, an insufficient amount of PC-theory in a general university degree in economics? If so, how so?
I would explain #1 as being caused primarily by a desire for the market to behave differently. Most interventions don't happen because something is WRONG, but because somebody wants something else. Like right now people are complaining about high grocery prices, not because high grocery prices are unwarranted, but because they do not like it.
If I go to the store and find the shelf where the Oreos are completely empty, it is clear to me as someone with a moderate understanding of economics that demand is exceeding supply and the price of Oreos can be expected to go up until Nabisco can reliably increase production. But the average shopper complains that the stupid grocery store didn't order enough Oreos. When the store does restock, and the price goes up, the same shoppers will piss and moan that greedy corporate jackholes are price-gouging them. Then someone will write an article about record profits and shortages when the cost of production has barely gone up at all, but literally nobody asks "have people been eating a lot more Oreos lately?"
And if you make new price-gouging laws to interfere in the market WITHOUT asking that, you're gonna fuck things up. It's not a market failure when prices are high. It's only a failure when prices are IRRATIONALLY high, and I don't think people are even entertaining the idea that maybe the current prices are perfectly rational.
For standard economists, the definition of “wrong” involves potential gains from trade that remain unexploited. They can then discuss interventions in terms of externalities and market failure. To speak of a more general wrongness implies that interventions should be legitimate redistributions of wealth, rather than solutions to positive sum games (or avoidance of negative sum games).
I agree with that. Accusations of market failure is the conventional economists' fig leaf for the phenomenon where “Most interventions don't happen because something is WRONG, but because somebody wants something else. “
Right, "market failure" is a potential value of "wrong." My whole issue, and I don't seem to have communicated it very well, is that we're not usually intervening in the market to fix an actual problem that actually exists with an actual solution that is known to work; we are typically intervening with a ham-handed effort to just force market actors into the behaviour we want, without regard to how it will happen or what externalities will come of it.
Like the WGA and SAG-AFTRA strike recently. The end result was a contract that was much more favourable to streaming royalties, instead of being heavily loaded toward lump sum payments from licensing deals. Accordingly, there was an almost immediate result of streaming services (a) raising their monthly fees, and (b) licensing fewer titles.
The public was mystified and outraged by this. In their minds, the streaming royalties were magical, and once the rates were increased the actors and writers would just automatically get more money. It never occurred to them that the streaming platforms needed to get that money themselves, first, let alone where exactly those platforms get their money from.
There seem to me -- a lowly practicioner of finance -- to be two kinds of economists. One is a scientist working with data and writing and speaking about technical subjects professionally, and perhaps dumbing this down a bit for laymen in more accessible writings and lectures for popular consumption. The other is an ideologue who employs economic theory and data to support a prexisting policy agenda whether the sum total of data and theory supports that agenda or not. Some (maybe many) economists walk in the both worlds or started one way and ended the other, but you can usually identify pretty quickly what kind of economist you're dealing with. It's much easier to be latter type, moreover the employment of economic theory and data to support highly fashionable policy agendas can sometimes be enough to make such economists minor celebrities, with all of the remuneration and status pertaining thereto.
My book, Specialization and Trade, explains that market failure theory would suggest that government would subsidize what the market delivers insufficiently and restrict what the market delivers excessively. But in practice government subsidizes demand and restricts supply. That combination is incoherent for addressing market failure but serves the interests of sellers.
"Economics in one Lesson" is helpful for understanding consequences of interventions. I mean... the book will almost always argue "for goodness sake, please don't" across two dozen points of intervention, but the way it gets there tracing the various consequences at different levels and timescales is really illuminating. Very readable for a layman. Was for me.
Really good point. There would surely be a market for such a book - people love to hate economists. Makes me wonder if one could ever calculate what % of value destroyed by market failures is avoided by interventions, or what the overall economic impact of interventions is.
I think many ancap/libertarian-types hate you guys for justifying too many interventions, too. Or for helping structure the market so, that it can be systematically intervened in to begin with. You cannot run a central bank/currency monopoly without some economists in the mix (if not running it). I don't hate y'all, though <3
Economics is in some sense the opposite of psychology: it is the social science that requires the least amount of methodological empathy (https://en.wikipedia.org/wiki/Verstehen), it describes a world and social life as a machine made of cash nexus transactions, and frequently attracts those who have the least amount of empathy. Then they don't understand why people do not buy their ideas, because they do not understand people as such.
Basically, it is simple. Cash is cold and callous. People in a community, interacting daily, remember what favours they owe to each other. But a stranger who is not a member of a community, is given a favour reminder, money, so the next time he is around he can get a favour in return and give it back. Paying cash is basically like saying "we are not friends". This is why when we are invited to dinner, we bring $50 wine not $50 in cash.
As Carlyle noticed, society in 1850 was more cash-centric than in 1350, and as a result colder, more callous, more strangers interacting with strangers, more alienated, more of a "we are not friends" vibe.
Market interventions are a strange way to put what states do, as it assumes the market - the cash nexus - is the default way of doing things and this is the only thing that exists outside the state.
Briefly, a lot of things used to be provided by churches and religious charities, as they had an explicit "we are a loving community of friends" vibe. The state took them over as religion declined. Hospitals and universities were 1000 years ago not a market. There was a pretty much mandatory church tax and the Church provided them. The Church provided a kind of economic regulation as well, telling people horrifying stories how usurers suffer in hell.
So briefly "market interventions" happen, because cash nexus transactions are felt as cold and callous. And the state took over the "we are a warm caring community" vibe from churches.
"When considering actual interventions in markets, the first instinct of economists and their students is to search for nearby plausible market failures". Always consider who benefits and who acted to intervene. Plausibility requires it.
??? It seems to me that the default assumption for economists is that politicians indefinitely intervene (or in the case of externalities, fail to intervene) in markets in order to transfor income to specific people and that our comparative advantage is to show them how they could transfer the income more efficiently.
The biggest econ error is the delusion that a little grey triangle on a supply and demand graph is anything but an idealized abstraction and has more than a **small** correlation to human well being in any system to the right of outright communism.
Spoken either like a leftist or someone with no comprehension of economics.
Even if “the little grey triangle…” were a “problem”, as you suggest, the idea that that would be “the biggest econ error” is… delusional.
That you don’t understand that allowing free exchange of goods and services, and that the supply and demand for such goods and services at market prices is a better system than ANY. OTHER. REAL. WORLD. SYSTEM you can cite means, for instance, that you don’t have a clue when it comes to the Hayekian knowledge problem.
Spoken as a PhD statistician who's worked with economists and understands how ridiculously ignorant libertarian economists are of how to make models with a meaningful relationship to the world rather than their ideology.
There is a VAST landscape between understanding that a market is a good way to reveal knowledge about capacities and interests and create incentives and the kind of certainty that government interventions are almost certainly negative for welfare espoused by mathy ideologists like Hanson.
You are the one who began by speaking in certainty - “the biggest econ error…”
Hanson and those of us who favor markets offer skepticism and caution about government interventions, not certainty.
As Arnold Kling says: "Markets fail. Use markets."
But since you are so smart, please name 3 government interventions which were clearly positive for welfare (beyond the very obvious classic example of taxing local producers of foul emissions, or equally obvious “tragedy of the commons” examples like overgrazing common land). And state why the government intervention into markets made a positive difference.
Since you acknowledge you are not an economist, let me caution you not to simply use redistributionist government transfers, since those are not market interventions. And do not name interventions which fix problems with *other* government interventions; you need to name interventions which fix problems with *actually* free markets.
Sure the "biggest error" language was inexact. To be fair, the OP was basically: government intervention bad, see supply and demand. The point I was trying to make is that right wing economists don't ever actually make more sophisticated arguments than this. They simply invent equations and declare that conclusions they draw from doing (sometimes fancy) math downstream of those equations demonstrate that their prior ideological positions are required by science. When other folks demonstrate empirically that those conclusions are wrong they'll do things like what you're doing. Get defensive and make accusations like, what, you don't believe in supply and demand? And then they try to change the argument. Show me XYZ or you're an ignorant left I can dismiss and stay in my mathified ideological fortress. Or just wave their hands over their invented equations and say see, I already proved what you're saying is wrong. Your analysis or data must be wrong.
A great example is minimum wage. Conservative economists constantly declare portentously that minimum wages cause massive damage to economies and people (because of those little grey triangles!). Then when the minimum wage starts rising around the country (back to levels last seen during post war years of some of the fastest growth in our history and the period of the great compression where population welfare increased most in our history, not counting end of slavery) what happened? Literally nothing even resembling the kinds of disasters confidently asserted were certain by conservative economists. Even in maybe the most studiable case of Seattle, with a large, quick increase in only part of the metro area, the results were mixed and almost certainly increased total welfare.
But you want to play the I'm smarter than you game so you can dismiss my argument and not actually think about them. So I'll play. Good market interventions that aren't environmental? Anti trust. Labor organization/suppression regulation. Non discrimination. Pretty much all financial regulation. All kinds of labeling requirements. Truth in advertising. Much of zoning (I'm def YIMBY but still want, say, industrial areas separated from commercial/residential areas). I could go on. We live in a nice society because of intervention in and regulation of the market.
Remember not to respond as you did the first two times, with non sequiturs about how markets are best. No one here is arguing for central planning. Every market is shaped by society. In complex modern societies that means shaped by government. The discussion is around how a market should be shaped by government.
Ok, just a few quick hit points, since it would take more than all day to respond to everything you wrote above.
I’ll actually give you “Non-discrimination”. Whatever relatively smaller negatives come from this, I will wholeheartedly agree the net effect is positive. One for you!
I’ll also give you “all sorts of labeling requirements”. It’s a relatively small intervention that doesn’t interfere with prices, supply or demand, and it’s one of the few that is specifically about getting us closer to the economist’s paradigm of “perfect information”. So it goes in your column, but it’s a tiny win that very few “libertarian” economists would argue against - and certainly wouldn't argue causes *significant* harm other than for a few small businesses on their way up.
“Every market is shaped by society. In complex modern societies that means shaped by government.” Here you are simply arguing a tautology: “because government intervenes all the time, government intervenes all the time…”. And so you argue that government intervention should be the norm because it is the norm, and so YOU have decided that we can only talk about which government interventions that are designed to counteract other government interventions are good, but we are not allowed to question the premise that most government interventions are good and a given, let alone suggest that removing government interventions is often, let alone usually, the right answer. 🙄🙄 I can’t argue with that when your rules of the game state explicitly that I can’t argue with that! Yup, you win…
The way you phrased the zoning one we might actually be more in agreement than on anything else.
You are wrong about minimum wage. But you are most wrong when you claim economists proclaim “massive damage” or “because of those little triangles”. Go read Thomas Sowell to better understand. But I will readily concede that many minimum wage laws don’t do THAT much damage, precisely because they don’t set the wage THAT much higher than what the natural wage would be (which is the case often because the redistributionist “wage” for not working in our generous welfare state is quite high for adults. But we can try to discuss the welfare trap some other time…). But according to your logic, why not set minimum wages to $50 an hour. Or $100 an hour? If higher than market is good, why isn’t higher still even better? How is it that government knows what the best price to set for labor - across broad regions of land - should be?
On most of the rest you are simply wrong. Though anti-trust is a complicated one on which even right-of-center economists don’t all agree, not even those focused on reducing government power, so it would be particularly fruitless to discuss.
But it is your claim near the end that makes it clear that further dialogue is pretty pointless. When you say “We live in a nice society because of intervention in and regulation of the market”, the phrase “because of” marks you as an Elizabeth Warren leftist, pure and simple.
It demonstrates that you do not grok - and are utterly uninterested in grokking - that the causality doesn’t run the way you suggest, but in fact runs almost 180 degrees in the opposite direction. Because of the wonders of the market, we live in such a rich society that we are able to sustain all sorts of wealth-reducing interventions.
Have a nice day.
…and try reading some Thomas Sowell, starting with Basic Economics. If you ever actually take my suggestion, you might even thank me some day.
Just because supposedly there has never been “a free market anywhere” - a suggestion with which I disagree, at least if you go back to the days before the New Deal, and the couple of centuries before that in particular - still does not mean that free/freer markets are not material better than “interventionist” markets almost all the time.
Okay. Granted. But governments do things other than national defence and money supply which they do screw up. And companies which are better information gatherers, do unload a lot of externalities onto someone else's balance sheet to max the share value. I guess I am just saying there will always be an interaction between these two phuque ups.
Well, if that truly IS all your saying, then we are in agreement.
When it truly is externalities that companies are shunting off to someone else, there can be a solid case for government interventions. But do you grant that this is the case far less than the number of times leftist politicians, let alone other leftists, cite "market failure" as the justification for their intervention?
And do you not grant that it's somewhere between plausible and likely that removing the "other things governments do" intervention would make things better than the *additional* interventions designed to supposedly make things better to fix the prior government intervention?
The most important concept in economy is not supply and demand, but bargaining power.
Supply and demand explains most of the instances of bargaining power in a free market, but is not the only factor.
On the other side, "market failure" is an ill concept, in the sense engineers don't call the fall of a bridge a "gravity failure".
Market is what it is, and if it delivers results we, as a society, don't like, we need to engineer interventions that have a more pleasant overall outcome, with its pros and cons.
If by “we” you mean “mob rules” majorities using the monopoly violence power of government, good luck with that being better the (likely large) fraction of the time you ain’t with the “mob”.
What I'd like to see (to fix this problem) is for economists to build large predictive numerical models of which policy decisions will get made. These would be machine learning models, optimized to fit the data. That way, assumptions of what policymakers are doing and why, could be replaced with testable theories of what policymakers are doing and why.
My suspicion is that US policymakers mostly choose policies because their corporate donors want them to (because the policies directly benefit those donors), or because the policies are popular with voters.
I'd like to see large predictive numerical ML models in every field. A whole-human-body model in medicine, for example. Data driven is better than opinion driven.
Ok so economists play market archeology to find out why their own interventions were made?
Aren't interventions usually explained to at least peers, let alone the public?
I mean, I assume anyway that all interventions are down to either ignorance or cronyism.
But the fact that economists actually spend time finding (and disagreeing on) root causes of interventions - that other economists made/advised - feels like a weird attempt at distancing themselves from their own responsibility.
Some examples would drive your point home for those of us outside the field. Perhaps Professor Hanson has a book in the works?
I agree I’m much looking forward to some type case examples of when fact #2 has been taken as explanation for fact #1 and lead to misdirected interventions
I have come to understand that US universities are heavily left wing leaning but what macro economists are not introduced to the public choice theory??
An intro to public choice is not enough to change their intro teaching practices.
One of my constant complaints to the folks at Econlog is that they never seem to actually use Public Choice theory to improve policy advocacy.
Fully agree but it might be my English that’s not sufficient. I didn’t mean a brief introduction/overview of PC-theory What I meant was that any university degree in macroeconomics would introduce the student to the whole theory as to the Austrian school or Keynes economic theory or any of the other major theories. I’m an old man but this was how economics degrees were carried out in the early-90:s here. We had briefer introductions to let’s say Malthusian theory, Marxism and other more outdated theories but were considered to have left contribution to the field (personally I’d put Keynes, Galbraith and such on that list too now 😉)
Then, at the end of your studies, you could specialize further in any school/theory contemporary or as outdated as you wished. Is this, in your opinion, an insufficient amount of PC-theory in a general university degree in economics? If so, how so?
It would take a LOT more than they are now getting.
Okay I guess I’m not updated on how little they get these days 😁🤷♂️
I would explain #1 as being caused primarily by a desire for the market to behave differently. Most interventions don't happen because something is WRONG, but because somebody wants something else. Like right now people are complaining about high grocery prices, not because high grocery prices are unwarranted, but because they do not like it.
If I go to the store and find the shelf where the Oreos are completely empty, it is clear to me as someone with a moderate understanding of economics that demand is exceeding supply and the price of Oreos can be expected to go up until Nabisco can reliably increase production. But the average shopper complains that the stupid grocery store didn't order enough Oreos. When the store does restock, and the price goes up, the same shoppers will piss and moan that greedy corporate jackholes are price-gouging them. Then someone will write an article about record profits and shortages when the cost of production has barely gone up at all, but literally nobody asks "have people been eating a lot more Oreos lately?"
And if you make new price-gouging laws to interfere in the market WITHOUT asking that, you're gonna fuck things up. It's not a market failure when prices are high. It's only a failure when prices are IRRATIONALLY high, and I don't think people are even entertaining the idea that maybe the current prices are perfectly rational.
For standard economists, the definition of “wrong” involves potential gains from trade that remain unexploited. They can then discuss interventions in terms of externalities and market failure. To speak of a more general wrongness implies that interventions should be legitimate redistributions of wealth, rather than solutions to positive sum games (or avoidance of negative sum games).
If a gain from trade is not being exploited, there is probably a reason, and if you don't know what it is you should definitely not try to "fix" this.
I agree with that. Accusations of market failure is the conventional economists' fig leaf for the phenomenon where “Most interventions don't happen because something is WRONG, but because somebody wants something else. “
Right, "market failure" is a potential value of "wrong." My whole issue, and I don't seem to have communicated it very well, is that we're not usually intervening in the market to fix an actual problem that actually exists with an actual solution that is known to work; we are typically intervening with a ham-handed effort to just force market actors into the behaviour we want, without regard to how it will happen or what externalities will come of it.
Like the WGA and SAG-AFTRA strike recently. The end result was a contract that was much more favourable to streaming royalties, instead of being heavily loaded toward lump sum payments from licensing deals. Accordingly, there was an almost immediate result of streaming services (a) raising their monthly fees, and (b) licensing fewer titles.
The public was mystified and outraged by this. In their minds, the streaming royalties were magical, and once the rates were increased the actors and writers would just automatically get more money. It never occurred to them that the streaming platforms needed to get that money themselves, first, let alone where exactly those platforms get their money from.
There seem to me -- a lowly practicioner of finance -- to be two kinds of economists. One is a scientist working with data and writing and speaking about technical subjects professionally, and perhaps dumbing this down a bit for laymen in more accessible writings and lectures for popular consumption. The other is an ideologue who employs economic theory and data to support a prexisting policy agenda whether the sum total of data and theory supports that agenda or not. Some (maybe many) economists walk in the both worlds or started one way and ended the other, but you can usually identify pretty quickly what kind of economist you're dealing with. It's much easier to be latter type, moreover the employment of economic theory and data to support highly fashionable policy agendas can sometimes be enough to make such economists minor celebrities, with all of the remuneration and status pertaining thereto.
What is the book that best explains this point to a layman?
My book, Specialization and Trade, explains that market failure theory would suggest that government would subsidize what the market delivers insufficiently and restrict what the market delivers excessively. But in practice government subsidizes demand and restricts supply. That combination is incoherent for addressing market failure but serves the interests of sellers.
I don't know, but as a lay reader I liked http://www.daviddfriedman.com/Academic/Hidden_Order/Hidden_Order_Contents.html which explains basic econ with a pov like this and includes a chapter on politics. The author has a substack.
I liked Arnold Kling's book too but it has less of the Econ 101.
"Economics in one Lesson" is helpful for understanding consequences of interventions. I mean... the book will almost always argue "for goodness sake, please don't" across two dozen points of intervention, but the way it gets there tracing the various consequences at different levels and timescales is really illuminating. Very readable for a layman. Was for me.
For those who feel as dense as me trying to understand, check out this alternative post on a similar theme: https://open.substack.com/pub/maximumprogress/p/dont-endorse-the-idea-of-market-failure
Really good point. There would surely be a market for such a book - people love to hate economists. Makes me wonder if one could ever calculate what % of value destroyed by market failures is avoided by interventions, or what the overall economic impact of interventions is.
The reason that people hate economists is that they don't think that we are ENOUGH in favor of typical interventions.
I think many ancap/libertarian-types hate you guys for justifying too many interventions, too. Or for helping structure the market so, that it can be systematically intervened in to begin with. You cannot run a central bank/currency monopoly without some economists in the mix (if not running it). I don't hate y'all, though <3
Professor Hanson,
Economics is in some sense the opposite of psychology: it is the social science that requires the least amount of methodological empathy (https://en.wikipedia.org/wiki/Verstehen), it describes a world and social life as a machine made of cash nexus transactions, and frequently attracts those who have the least amount of empathy. Then they don't understand why people do not buy their ideas, because they do not understand people as such.
Basically, it is simple. Cash is cold and callous. People in a community, interacting daily, remember what favours they owe to each other. But a stranger who is not a member of a community, is given a favour reminder, money, so the next time he is around he can get a favour in return and give it back. Paying cash is basically like saying "we are not friends". This is why when we are invited to dinner, we bring $50 wine not $50 in cash.
As Carlyle noticed, society in 1850 was more cash-centric than in 1350, and as a result colder, more callous, more strangers interacting with strangers, more alienated, more of a "we are not friends" vibe.
Market interventions are a strange way to put what states do, as it assumes the market - the cash nexus - is the default way of doing things and this is the only thing that exists outside the state.
Briefly, a lot of things used to be provided by churches and religious charities, as they had an explicit "we are a loving community of friends" vibe. The state took them over as religion declined. Hospitals and universities were 1000 years ago not a market. There was a pretty much mandatory church tax and the Church provided them. The Church provided a kind of economic regulation as well, telling people horrifying stories how usurers suffer in hell.
So briefly "market interventions" happen, because cash nexus transactions are felt as cold and callous. And the state took over the "we are a warm caring community" vibe from churches.
"When considering actual interventions in markets, the first instinct of economists and their students is to search for nearby plausible market failures". Always consider who benefits and who acted to intervene. Plausibility requires it.
??? It seems to me that the default assumption for economists is that politicians indefinitely intervene (or in the case of externalities, fail to intervene) in markets in order to transfor income to specific people and that our comparative advantage is to show them how they could transfer the income more efficiently.
Great piece.
A *small* suggestion in trying to address this problem with economists: come up with a pithy phrase to encapsulate it.
These ain’t great, but here are two starters:
- “Governments have intervened in 99 of the last 11 market failures”
- “Government interventions have helped improve 3 of the last 33 ‘market failures’”
Hey, maybe combining those two together gets the point across after all…
The biggest econ error is the delusion that a little grey triangle on a supply and demand graph is anything but an idealized abstraction and has more than a **small** correlation to human well being in any system to the right of outright communism.
Spoken either like a leftist or someone with no comprehension of economics.
Even if “the little grey triangle…” were a “problem”, as you suggest, the idea that that would be “the biggest econ error” is… delusional.
That you don’t understand that allowing free exchange of goods and services, and that the supply and demand for such goods and services at market prices is a better system than ANY. OTHER. REAL. WORLD. SYSTEM you can cite means, for instance, that you don’t have a clue when it comes to the Hayekian knowledge problem.
Spoken as a PhD statistician who's worked with economists and understands how ridiculously ignorant libertarian economists are of how to make models with a meaningful relationship to the world rather than their ideology.
There is a VAST landscape between understanding that a market is a good way to reveal knowledge about capacities and interests and create incentives and the kind of certainty that government interventions are almost certainly negative for welfare espoused by mathy ideologists like Hanson.
You are the one who began by speaking in certainty - “the biggest econ error…”
Hanson and those of us who favor markets offer skepticism and caution about government interventions, not certainty.
As Arnold Kling says: "Markets fail. Use markets."
But since you are so smart, please name 3 government interventions which were clearly positive for welfare (beyond the very obvious classic example of taxing local producers of foul emissions, or equally obvious “tragedy of the commons” examples like overgrazing common land). And state why the government intervention into markets made a positive difference.
Since you acknowledge you are not an economist, let me caution you not to simply use redistributionist government transfers, since those are not market interventions. And do not name interventions which fix problems with *other* government interventions; you need to name interventions which fix problems with *actually* free markets.
Sure the "biggest error" language was inexact. To be fair, the OP was basically: government intervention bad, see supply and demand. The point I was trying to make is that right wing economists don't ever actually make more sophisticated arguments than this. They simply invent equations and declare that conclusions they draw from doing (sometimes fancy) math downstream of those equations demonstrate that their prior ideological positions are required by science. When other folks demonstrate empirically that those conclusions are wrong they'll do things like what you're doing. Get defensive and make accusations like, what, you don't believe in supply and demand? And then they try to change the argument. Show me XYZ or you're an ignorant left I can dismiss and stay in my mathified ideological fortress. Or just wave their hands over their invented equations and say see, I already proved what you're saying is wrong. Your analysis or data must be wrong.
A great example is minimum wage. Conservative economists constantly declare portentously that minimum wages cause massive damage to economies and people (because of those little grey triangles!). Then when the minimum wage starts rising around the country (back to levels last seen during post war years of some of the fastest growth in our history and the period of the great compression where population welfare increased most in our history, not counting end of slavery) what happened? Literally nothing even resembling the kinds of disasters confidently asserted were certain by conservative economists. Even in maybe the most studiable case of Seattle, with a large, quick increase in only part of the metro area, the results were mixed and almost certainly increased total welfare.
But you want to play the I'm smarter than you game so you can dismiss my argument and not actually think about them. So I'll play. Good market interventions that aren't environmental? Anti trust. Labor organization/suppression regulation. Non discrimination. Pretty much all financial regulation. All kinds of labeling requirements. Truth in advertising. Much of zoning (I'm def YIMBY but still want, say, industrial areas separated from commercial/residential areas). I could go on. We live in a nice society because of intervention in and regulation of the market.
Remember not to respond as you did the first two times, with non sequiturs about how markets are best. No one here is arguing for central planning. Every market is shaped by society. In complex modern societies that means shaped by government. The discussion is around how a market should be shaped by government.
Ok, just a few quick hit points, since it would take more than all day to respond to everything you wrote above.
I’ll actually give you “Non-discrimination”. Whatever relatively smaller negatives come from this, I will wholeheartedly agree the net effect is positive. One for you!
I’ll also give you “all sorts of labeling requirements”. It’s a relatively small intervention that doesn’t interfere with prices, supply or demand, and it’s one of the few that is specifically about getting us closer to the economist’s paradigm of “perfect information”. So it goes in your column, but it’s a tiny win that very few “libertarian” economists would argue against - and certainly wouldn't argue causes *significant* harm other than for a few small businesses on their way up.
“Every market is shaped by society. In complex modern societies that means shaped by government.” Here you are simply arguing a tautology: “because government intervenes all the time, government intervenes all the time…”. And so you argue that government intervention should be the norm because it is the norm, and so YOU have decided that we can only talk about which government interventions that are designed to counteract other government interventions are good, but we are not allowed to question the premise that most government interventions are good and a given, let alone suggest that removing government interventions is often, let alone usually, the right answer. 🙄🙄 I can’t argue with that when your rules of the game state explicitly that I can’t argue with that! Yup, you win…
The way you phrased the zoning one we might actually be more in agreement than on anything else.
You are wrong about minimum wage. But you are most wrong when you claim economists proclaim “massive damage” or “because of those little triangles”. Go read Thomas Sowell to better understand. But I will readily concede that many minimum wage laws don’t do THAT much damage, precisely because they don’t set the wage THAT much higher than what the natural wage would be (which is the case often because the redistributionist “wage” for not working in our generous welfare state is quite high for adults. But we can try to discuss the welfare trap some other time…). But according to your logic, why not set minimum wages to $50 an hour. Or $100 an hour? If higher than market is good, why isn’t higher still even better? How is it that government knows what the best price to set for labor - across broad regions of land - should be?
On most of the rest you are simply wrong. Though anti-trust is a complicated one on which even right-of-center economists don’t all agree, not even those focused on reducing government power, so it would be particularly fruitless to discuss.
But it is your claim near the end that makes it clear that further dialogue is pretty pointless. When you say “We live in a nice society because of intervention in and regulation of the market”, the phrase “because of” marks you as an Elizabeth Warren leftist, pure and simple.
It demonstrates that you do not grok - and are utterly uninterested in grokking - that the causality doesn’t run the way you suggest, but in fact runs almost 180 degrees in the opposite direction. Because of the wonders of the market, we live in such a rich society that we are able to sustain all sorts of wealth-reducing interventions.
Have a nice day.
…and try reading some Thomas Sowell, starting with Basic Economics. If you ever actually take my suggestion, you might even thank me some day.
“The point I was trying to make is that right wing economists don't ever actually make more sophisticated arguments than this.”
So you seemingly apologize that your earlier wording was “inexact”, but you proceed to double down by using the word “ever” in your 3rd sentence.
Makes it hard to take you seriously.
Agreed. There really has never been a free market anywhere? So humanity has to deal with the oil and water mixing.
Just because supposedly there has never been “a free market anywhere” - a suggestion with which I disagree, at least if you go back to the days before the New Deal, and the couple of centuries before that in particular - still does not mean that free/freer markets are not material better than “interventionist” markets almost all the time.
Okay. Granted. But governments do things other than national defence and money supply which they do screw up. And companies which are better information gatherers, do unload a lot of externalities onto someone else's balance sheet to max the share value. I guess I am just saying there will always be an interaction between these two phuque ups.
Well, if that truly IS all your saying, then we are in agreement.
When it truly is externalities that companies are shunting off to someone else, there can be a solid case for government interventions. But do you grant that this is the case far less than the number of times leftist politicians, let alone other leftists, cite "market failure" as the justification for their intervention?
And do you not grant that it's somewhere between plausible and likely that removing the "other things governments do" intervention would make things better than the *additional* interventions designed to supposedly make things better to fix the prior government intervention?
The most important concept in economy is not supply and demand, but bargaining power.
Supply and demand explains most of the instances of bargaining power in a free market, but is not the only factor.
On the other side, "market failure" is an ill concept, in the sense engineers don't call the fall of a bridge a "gravity failure".
Market is what it is, and if it delivers results we, as a society, don't like, we need to engineer interventions that have a more pleasant overall outcome, with its pros and cons.
If by “we” you mean “mob rules” majorities using the monopoly violence power of government, good luck with that being better the (likely large) fraction of the time you ain’t with the “mob”.
“First they came for the trade unionists…”
What I'd like to see (to fix this problem) is for economists to build large predictive numerical models of which policy decisions will get made. These would be machine learning models, optimized to fit the data. That way, assumptions of what policymakers are doing and why, could be replaced with testable theories of what policymakers are doing and why.
My suspicion is that US policymakers mostly choose policies because their corporate donors want them to (because the policies directly benefit those donors), or because the policies are popular with voters.
I'd like to see large predictive numerical ML models in every field. A whole-human-body model in medicine, for example. Data driven is better than opinion driven.
Housing and healthcare hahahaha yeah I agree
Ok so economists play market archeology to find out why their own interventions were made?
Aren't interventions usually explained to at least peers, let alone the public?
I mean, I assume anyway that all interventions are down to either ignorance or cronyism.
But the fact that economists actually spend time finding (and disagreeing on) root causes of interventions - that other economists made/advised - feels like a weird attempt at distancing themselves from their own responsibility.
Economists do not cause many interventions.