an interesting economics article

by **fadedpsychosis** on Mon Feb 03, 2014 8:19 am

http://www.wired.com/opinion/2014/02/tech-shouldnt-built-free-markets-needs-based-exchanges/
have fun BBS

by **BigBallinStalin** on Mon Feb 03, 2014 9:39 am

Perhaps the major flaw in the free-market view of human nature is that people are not simply self-interested, self-commanded individuals. What we are interested in, and our command mechanism itself, is overwhelmingly determined by social norms created by interactions with other people.

That's a view incorporated within the free markets approached which I've been learning.

Either this guy doesn't understand free markets, or he's confusing it with neoclassical economics (which makes claims that he's criticizing).

Modern science now understands that cooperation is just as important and just as prevalent in human society as competition.

I like his rhetoric about implying that if something is old, then it's stupid. It's not a valid argument, but it might be effective.

Moreover, recent economics research has shown that the basic assumption within classic market thinking — that there are many sellers and buyers that can be substituted for each other easily — does not apply even to economies such as that of the U.S.

That's not the only basic assumption, and there's no such thing as "classic market thinking." He's talking about 'pure competition' which is a standard model in any kind of economics. Economists use a spectrum in which pure competition and monopoly serve as the extremes. This framework allows for a comparison of markets which vary in their degree of competition.

Why is the real world made up of exchange networks rather than markets? In a word: trust.

That's a false dichotomy. Trust is embedded within the institutions through which exchanges (market and non-market) occur. Derp.

From what I've heard, the research on trust has been hardly fruitful. Problems of measurement seem to be the biggest issue, but maybe they'll get past that hurdle.

Overall, his approach is interesting because it can complement my research program. He gets a D- for failing to accurately convey the ideas of free markets, the Invisible Hand, and those of neoclassical economics, but it's rational for him to do so. He's denigrating them in order to increase the relative value of his book--'which may have the answers'. Booga booga booga!

by **BigBallinStalin** on Mon Feb 03, 2014 9:45 am

I agree with malefactor's comment below. The point of scientific research is to understand, not design. Policymakers do the 'engineering', but it doesn't follow that they must, nor does it follow that the political process can yield better results. It's like the Tale of the Emperor. The Emperor holds a music contest, and two musicians show up. One starts playing, and half way through the Emperor declares, "We have our winner!" The allegory refers to people's automatic advocacy for government planning and their uncritical rejection of the market process.

The alternatives to planned economies are the civil society and the market process through which institutions, order, and benefits arise. That's partly what the Invisible Hand idea is about.