Thursday, June 11, 2009

Yglesias on Markets

Matt Yglesias has an succinct take on markets this morning. Though he is talking about markets for health care, I think it captures problems of markets more generally as well as progressive reactions to them. Key quote
On a loosely related note, part of what’s wrong with the world is that the very same people who spend a lot of time cheerleading for free markets and donating money to institutions that cheerlead for free markets—businessmen, in other words—are the very people who have the most to gain from markets being totally dysfunctional. The absolute worst place on earth you can find yourself as a businessman is in the kind of free market you find in an Economics 101 textbook. As a market approaches textbook conditions—perfect competition, perfect information, etc.—real profits trend toward zero. You make your money by ensuring that textbook conditions don’t apply; that there are huge barriers to entry, massive problems with inattention, monopolistic corners to exploit, etc. So when it comes to something like health insurance, you have people on the left who want public policy to aim at replacing the market with publicly run entities and you have people in the business community who want public policy to aim at making the market as dysfunctional as possible. So you get what we have, which sucks.
There are many instances where markets provide the best products or services at the best price. More often than we on the left care to admit, robust, transparent markets serve people better than public provision.

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