Ignorance is a choice in today’s age of internet, memes, and information. Ignorance is not only facilitated by the rational preferences but also felicitated by the instrumental organs of mainstream media, government schools, and public institutions.
This math sums up Isaac Asimov’s premise:
“my ignorance is just as good as your knowledge“.
Application of this math in practice has massaged the unregulated ego of the academicians, experts, and politicians. Particularly, in the subject of economics, the trio enjoy a great deal to blabber since it is fashionable to socially express their loud opinions without examining the foundations and features of ‘basic economics’ these days. In this regard, the sadistic trio has frequently used the term “market failure” because it gives them the hedonic power to develop a monopoly on bashing the subject and subdue their ignorance at the expense of everyone else.
What the heck is ‘market failure’?
The trio believes that ‘market failure’ occurs:
1) when the market fails to deliver/allocate certain goods and services to the people ‘efficiently’,
2) greedy businessmen hoard the goods and inflate the prices to earn more profits,
3) market participants impeding the principles of altruism,
4) people resorting to ‘insider trading’, and
5) rise of the free riders, and what not.
Ceteris Paribus, the study isn’t right but also not wrong. It is just that the content is not defied with critical logic yet. Therefore, ‘market failure’ makes “conceptual sense” to unthinking people. Without the production and supply of unthinking people, the business of trio would fail. Thus, it is a norm to keep people ‘stupid’!
To discuss ‘market failure’ with the trio, you needn’t require a Ph.D. in economics. All you need is to be coherent and patient. Coherent, because it would take few critical observations to defy the logic of nonsense. Patient, because there’s a possibility of ‘autistic screeching’ from the opponent. In the whole discussion, the burden of proof isn’t on the antagonists of market failure but on the supporters of it. It is for the supporters to understand that market is not an institution or an entity.
It is a continuous and evolving process of the voluntary exchanges.
It fails when the ‘unaccountable’ external agencies like government, the central bank, and bureaucrats end up regulating, intervening and taxing the flow of the spontaneous processes. Generally, people believe that market is a located venue which cannot function without the external intervention. They’re wrong to study this because the market is a process which can internalize the external costs on its own, unlike “the government”.
Believing that market regulations can infuse equilibrium is like believing that fuel can extinguish the fire.
Market failure is a contradiction.
Market is a symbol of our evolution and civilisation. Whenever the government intends to regulate the order in a market, it does with an intent to re-elect. In the first place, the government breaks the limbs of the market through regulations, laws and money supply. Then, it runs a propaganda against the market by subduing that “see, if it were not for the government, market won’t have a crutch”. This saga is translated into ‘human design’, not ‘human action’. Nowhere the government would discuss “what causes the failure?” because doing so would lead to people’s detachment from legitimizing the state. It would only sell its ‘selective bias’ against the market because it envies the competition.
In a market, there’s nothing called ‘perfect competition’ because humans are driven by the principles of self-interest. People transact different things for the different values because value is subjective.
Perfect competition is an utopia. It does not exist.
Textbooks are not telling the whole story. There can only be imperfect competition because dynamic forces cannot be controlled in any universal manner.
For example: Any attempt to control the price takes away the incentive to produce and innovate more. This step kills the business of the small entrepreneurs who end up closing their units, thus, causing ‘jobless growth’. If the market does not have the open culture of welcoming the new economic players then it would beget price inflation which is backed by the moral hazardousness of mondustrial policy. In adjacent to this phase, the government intervention takes away the ‘economic freedom’ of the people and creates a bubble of few big business houses, and ends up sustaining the inflationary revenues expropriated from the matrix of ‘jobless prosperity’. Without the cronies, politicians cannot fund their next elections, outcome, and the ‘social media’ lies.
In this regard, Milton Friedman highlights:
“if a private enterprise is a failure, it closes down – unless it can get a government subsidy to keep it going; if a government enterprise fails, it is expanded. I challenge you to find exceptions.”
There’s nothing called “market failure”.
You cannot aggregate the forces of the market, calculate it and jump to the conclusion using econometric models. But, you can quantify the government failure since the constitution of the government is stitched by the wisdom of monopolies over violence, intimidation, conscription and expropriation. You can claim that “a lack of adequate information in a market can lead buyers and sellers to make sub-optimal decisions” but your assertions fail to include the fact that information is also a product. Once this fact is actualised, the whole premise of the example (that the lack of information is somehow different from a lack of any other product) disintegrate. This also applies in scenarios with asymmetrical information.
It’s the “government failure” in all the phases of an economy, which stands undiscussed. A government is an institution which cannot produce even a toothpick but would tax every producer producing the toothpicks. It enjoys the monopoly on the rules pertaining to logistics, operations and supply management, and then blames the market for not providing it when the providers run out of incentives due to draconian regulations and tax structures. I don’t know if you know about “regulatory capture” or not, but it is the principle which is a manifestation of the “government failure”.
Who dares to know about it?
On the other galaxy, public goods represent the DNA of central planning. It’s the “tragedy of the commons” that is likely to occur in this scenario. When the goods are owned by all, it is owned by nobody. Privatisation of goods and services is a practical argument because it addresses the problem of inefficiency and infrastructure lag. Do you think that government has any incentive to look after public goods? If yes then why wouldn’t it internalise the external issues like pollution, without snatching the fruits of your labor? It’s high time that we act “intellectually honest” in the interest of mankind than in the interest of parasites, before “government failure” fails the world.
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About the Author
Prof. Jaimine Vaishnav is an anarcho-capitalist based in Mumbai, India. His hobbies are about defending the liberties of all his dissents without charging any fee.
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@meritocratic