Tuesday, March 28, 2006

On closed belief systems

I suppose it is a measure of my current lack of focus on very meaningful things that I have lately been having repeated arguments with free market enthusiasts. Not a very fruitful nor entertaining activity as they usually are not the most intellectually inspiring thinkers. In any case, I have now been reminded several times why I used to so much dislike Freudianism - there was no way to disprove the argument, the position was formulated in such a hermetically closed fashion that there simply was no way to prove it wrong. There was no falsifibiality. Now the free market fundamentalism goes about like this: the markets work absolutely perfectly. Fullstop. Then you go and say that no they don’t, what about this and this. Well, the answer always goes, no matter what's the specific point, that that’s a concequence of the fact that the markets are "artificially" prohibited from working perfectly. Beautiful. My question would be what kind of an empirical or logical observation would then disprove this free market theory? Out of sheer perverse curiosity: what would it take?

Of course the actual fact is that even when the markets would be allowed to operate at full efficiency (a logical impossibility in itself) they never would do it. It is too often in the rational interest of market operators not to go for full free competition, or in the irrational interest for that matter. There are all sorts of inherent psychological and cultural hindrances that will permanently prohibit market from functioning “purely”, as in a void – or a laboratory. The world is not a void. Or a laboratory. Concequently there is then no such thing as a perfect market, and there never will be. That should be the starting point of all debate. But that does not count as a legitimite counter argument at all for those that have embraced the faith. Excactly like no observations ever penetrated orthodox Freudianism or Marxism-Leninism. They were outside all rational debate – not a good thing to be for a philosophy or a political ideology but there you go.


Phil said...

Now the free market fundamentalism goes about like this: the markets work absolutely perfectly.

I doubt you'll find any rational free markters that believe the free market works absolutely perfectly. We just feel it works better than under the thumb of the government with their corrupt officials and shady lobbyists.

stockholm slender said...

Well, my point would be that the mere mechanism itself does not negate inherent human tendencies - and that it is often rational for market actors not to go for full competition for example. There is nothing in the process itself that would be able to automatically preclude this human and automatic "friction". So, we would end up with corrupted process even with full deregulation. Or especially then.

It is checks and balances that work, and that is why regulation is in fact essential for a smoothly functioning market. What I find hard to understand is this automatic assumption that government is naturally corrupt and that markets are naturally not. As both consist of human agents, they both have a continuous tendency for imperfection and shortsightedness. We can use the conflicting interests of both institutions to keep a functioning balance. But you would remove the other half of the equation which would be disastrous.

stockholm slender said...

Just to continue the point: it is this axiomatic believe "market good, government bad" that leads dangerous blindness and denial of reality. First of all these two need each other to work, especially free market need strong state to keep the playing field level. But even more importantly, these question should be resolved without existing bias. Sometimes government action is far better and more efficient than the market force. Often of course this is not case, especially on the traditional "economical" fields. But not always even there. We should not let ideology and irrational faith predetermine our decisions. It is very unfortunate that this dangerous attitude is spreading so rapidly in our societies.

P.P. said...

I see, you lost my point; probably, because of my terrible English or your fanatic mind. The increase of market-orientation does not mean that legislation or "control" would decrease. It means that state-controlled production would decrease. Commodities and services should produce in markets, if the markets are competitive. To maintain sufficient competition in different markets we all the time have to develope legislation which forbid price agreements and try to prevent monopolies. There will be always natural monopolies and, I suppose, they should be state-owned.

stockholm slender said...

Well, actually I don't think that I would much disagree really: I am not very enthusiastic in seeing the state as a direct player on the market, excluding some natural monopolies like you say. It is just that not many market supporters make the distinction you say you make: they see ALL government interferance as negative. This by and large is the Republican rhetoric and politics in the USA with many disastrous concequences.