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The truth doesn't have to be entirely one or the other. Markets can be good and regulation can be good at the same time. And both can have risks for bad outcomes as well.

It's interesting how folks on one extreme will point out every fault of the other, with their own reasons explaining away critiques of their favorite side.

> The great thing about markets is that when a company does bad things, the public usually can switch providers, thus punishing bad behavior.

This puts a lot of trust in people being well informed and having enough energy to react. We live in a complex world, and it's nearly impossible for consumers to each vote with their wallets on every aspect of life. In theory I could vet every food, drug, and hardware supplier personally before buying anything. But I'd rather have the most safety critical stuff regulated before it can be offered for sale.

> The great thing about markets is that when a company does bad things, the public usually can switch providers, thus punishing bad behavior. There are notable counter examples where there isn’t consumer choice, but those organizations get dragged in the media and are forced to change in the court of public opinion.

Err yeah, like Amazon and Google and Disney and Comcast and $INSERT_MEGACORP_HERE totally don't buy out competitors, or use dominance in one field to buy dominance in another field.

But all the major market instabilities have been solved by government bailouts even in the current way of things. So they are provenly unstable and require government propping them up constantly with public money.

I think you are the one espousing fairyland. Without the private gain public loss “market” we have now, half the market would have died in 2008 and the other half would have died last year…

By saying half the market would die die you mean GDP would have been cut in half without a bailout in 2008?

Obviously that’s hyperbole but I did have a look and industrial activity in the USA declined by 46%. Global trade dropped by 70%. GDP itself dropped by about 30%, from what I could find.

By contrast, the Great Recession of 2008 saw a GDP drop of 4.3%.

So, yes, without government bailouts, markets can fail _catastrophically_

30% was a lot higher than I realized.

Yes. Or worse, at least. Over a trillion dollars was injected and there was still a recession.

That just means markets need corrections, not that there is an alternative. Exchange of goods is going to take place regardless. You can have the government control all economic activity outside the black market, but that leads to for worse outcomes which only benefits the party elite.

What party? You're confusing dictatorships and planned economies.

The party that plans the economy.

Why would a political organization plan the economy, as opposed to a specialized government agency? You're confusing dictatorships and planned economies.

Perhaps read “party” as “entity” or “organization of people” as in the phrase “a party to the agreement” or whatever?

That being said, I see no way that a governmental organization which plans the economy could fail to be political, by which I mean, closely connected to highly contentious government policy decisions.

Of course it will be, that's just the nature of making decisions. But these decisions have to be made anyway. It's better if they depend on the policies of an elected government than the whims of rich people.

I'm not sure that the decision do have to be made in the same sense that they are made if there is an explicit policy.

But, regardless, a "specialized government agency" which "plans the economy", would I think invariably be a "political organization".

If I put my cynic hat on for a moment, normal government policies often depend on the whims of rich people as we are, unequal access to lobbying is a problem.

They do. But how do you get rich? By having other people work for you. That cannot happen to nearly the same extent in a planned economy.

I don't think we really need stupidly rich people. Is taxation a planned economy?

A million poor people are rich in aggregate.

What are you trying to say?

To be clear, I am by no means a market-maximalist. I'm claiming that markets are an extremely effective way to govern the production of goods and the allocation of labor, compared to their alternatives. Further, I'm claiming that any sweeping claim that "markets" as a concept are bad is uninformed and patently wrong.

With that said, we have different tools for different scenarios. In 2020, we used the "national funding, mobilization, and redistribution" tool to combat COVID and I think that was probably smart. Doing so necessarily wasted a lot of money (through graft, incompetent capital allocation, ec.). But optimal capital allocation was not the most important thing last year. We wanted safety! State intervention wins here!

With respect to other market instabilities, well, it gets complex. 2008 was a mess of government, quasi-government, and private market behaviors all in a toxic dance.

In any case, most markets most of the time absolutely do not require the government to step in. The economy is breathtakingly large. I mean, just really, truly stupendously massive. I hear "capitalism is bad" and "markets are toxic" claims a lot, but I've never heard a viable proposal that could realistically function as effectively as a predominantly market system.

Also, I'm not claiming that our current markets are perfect. Certainly they are not. It's clear that there are huge issues in a significant number of industries (hospitals, housing, and education are all suffering from cost disease).

We can (should!) take a crack at fixing the issues we have. Most of those fixes will come bottoms-up through creative-disruption, and some will come tops-down through policy and regulation.

It's important to look at these things as tools in a toolbox, not totalitarian dogma in an ideology.

‘Bottom up creative disruption’ isn’t going to change the concentration of wealth … unless you count violence as creative disruption.

This is implying that externalities of bad government policies (ie encouraging high home owner rates) weren't the main cause of the market needing a bail out.

That’s what made the money worthless in the first place yes. Badly regulated markets. The financial market then made the problem orders of magnitude worse. Again, not enough regulation.

It’s so weird how a story of greedy investors turned out to be the fault of the government in the end. “You set it in place, we simply had to bite!”

I mean the thing is even a fully govenment-run, centralized economy, is a market. Each individual decides, is it worth continuing to do the shit they tell me to do? Or should I resist and suffer whatever coercion the state brings down on me. That's a choice, and thus it's an exchange (In the banal case, I exchange my labor in return for political favour; in the extreme case: I exchange my labor in return for not going to a gulag). Maybe not a "free" one, but it is a market nonetheless and most criticisms of market failure apply, with adjustments, to such a system, too.

You are describing individual workers in a planned economy, but a market description applies from the point of view of the planner as well: goods still have rates of substitution and thus cost in every way that matters, regardless of whether you choose to measure it in dollars or kilograms of wheat; closing your eyes and pretending they don’t is only going to make your plan less efficient. In fact, when Kantorovich tried to figure out how to make one more efficient (resulting in both a Stalin Prize and a Nobel Memorial Prize in economics, but no shifts in the Soviet bureaucracy), the free parameters of his model ended up being prices even if no pieces of paper with signatures of bankers were changing hands.

Which is not to say a market is a good thing in any specific implementation. What it is, in this degree of generality, is inevitable. That a (more or less) free exchange of tokens of value is a good way to achieve the optimum is an additional assumption that needs separate justification, but seems to be plausible so far, or at least lacking in shattering disproof. Still, there is a hell of a lot of distance between these and any particular Western country in the year of our Lord 2021. Going from being dissatisfied with the latter to rejecting the former is like immediately blaming the compiler when your home-grown TLS implementation gets hacked. I mean, compilers bugs do exist, but that giant ASN.1 serializer looks mighty suspicious. (Tax code, antitrust enforcement, employees’ rights, need I continue?)

I think your argument actually also touches on something that I see as a fault in recent Western socialist or socialist-aligned movements, which is that market forces and capitalism are often improperly separated. There is often a large focus on how the market is evil, even when it's discussed in a language that decries them as problems of capitalism; for example, people might blame problems such as high rents on capitalism, and then imagine that nationalizing real estate companies will fix it, which it of course most likely won't. So, kind of coming at this from the other side, I do agree that a clear separation is necessary when talking about capitalism vs socialism on the one hand, and market economies vs planned economies on the other hand. But then you have to explain: what is the difference between a market economy and a planned economy, in an age where economic planning in China takes prices and market forces into account, while in the West, a company like Amazon, operating within the market, is so large that it has to do demand planning akin to the Soviet bureaucracy, lest they over- or under-order produce? Which of these societies is truly "more market"?

I think that the market can indeed be a very valuable system to reduce all kinds of inefficiencies. But at the same time, changes in tax code or antitrust enforcement will not alter capitalism's natural tendency toward monopolization, which ultimately turns everything into a planned economy anyhow. So in my opinion, the question is about how to effectively use the positive effects of the market, while also avoiding the less-positive effects that private enterprise has on society at large. And it seems to me like Kantorovich may have been closer to finding an answer than HFT yuppies at wall street will ever be.

> So, to be honest, I don’t know what you’re on about. What’s the fairyland alternative to “markets”?

idk, whatever we have right now?

Most of our global economic activity is governed by markets. We also happen to have the largest, wealthiest, and healthiest human population in history right now. So I agree with you, but also not sure where you’re disagreeing.

> We can only analyze the efficacy of markets by comparing them against their alternative.

No, it can also be done theoretically, by actually computing the costs of production (required to sustain certain level of consumption) from something like Leontief matrix. And then comparing with reality. It hasn't been done, mostly because the required data are private, but it is possible to do in principle, and I would argue that it would be very instructional for any society to do such a calculation (and make the result publicly available).

> What’s the fairyland alternative to “markets”?

There are many alternatives, but you have to understand that almost nobody wants to replace markets as a whole. So the replacement is always partial.

Socialism supporters oppose capitalism, which is defined by two characteristics - (1) labour markets and (2) capital mostly privately owned. (Let's now put aside that free market and property ownership are actually completely orthogonal concepts.)

You can have a system which mostly gets rid of either one or both of these. For example, you replace (1) with worker cooperatives based on democratic control and replace (2) with a national investment fund that is again under shared ownership of the citizens. Both of these have been tried and work..

Does such a system replace all markets? No, but it replaces the chunk (labour market) that is considered the most contentious.

>No, it can also be done theoretically, by actually computing the costs of production (required to sustain certain level of consumption) from something like Leontief matrix. And then comparing with reality. It hasn't been done, mostly because the required data are private, but it is possible to do in principle, and I would argue that it would be very instructional for any society to do such a calculation (and make the result publicly available).

No it can't. Value (in the sense generally used in economics) can only be known through people's revealed preferences, and it's not possible to reveal people's preferences without giving them the chance to express them in a market. Markets require people to sacrifice money/labor/time to purchase things, which gives a much more meaningful measure of those things being valued than if people were just asked, surveyed or whatever and didn't have to put their money where their mouths were.

First, what I was proposing was not about preferences at all, but rather about how things are produced - if you want, you can just take the current consumption preferences, or put in your own into the model. For example, the model could tell you what the price of drugs would be without all the marketing expenses, and I claim it would be (in the U.S., say) several times smaller, and as such we can measure efficiency of the system (or different systems) if we compare reality to this theoretical value. Here efficiency is just a measure of how much waste the real system needs (and this might differ from neoclassical economics definition of "efficiency").

Speaking of preferences, I think you're buying too much into Hayek's free market ideology here. I don't think was proven in any way, in fact as you state, if the definition of preference is that cannot be revealed in other way, then you're starting with that as an axiom.

I would also say that I was born in a socialist system (with almost completely regulated market and planned economy), and it seems the last problem this system had was that the people's preferences weren't clear. In fact, if they weren't clear (for example, as queues for basic necessities) then you wouldn't be able to say that system was inefficient! Also, there was some internal competition, new products were created, and so on. The thing really was that the prices didn't reflect the preferences, which created lots of inefficiency (waste).

Agreed. There is this attempt at an “ah ha! I found a market failure!” and people extrapolate that to “capitalism is a failure and the source of all our problems”.

This of course ignores the incredible reduction in worldwide poverty over the past 50 years due to capitalism.

In unrelated news, there has been tremendous technological progress in the past 50 years.

Brought to you by capitalism or at least funded by governments who get their dollars from capitalist systems.

Of course research at some point involves the economy and therefore the economic system that happens to be dominant. Most countries have little use for Dollars by the way, preferring their own currencies.

“Happen to be dominant.” You mean the ones that haven’t failed?

And this may surprise you, but plenty of country still use “dollars” that aren’t American. But you already knew that.

>Most countries have little use for Dollars by the way, preferring their own currencies.

Their citizens have little use for dollars. Their foreign exchange reserve hoards them.

The American usage of "dollars" as a synonym for "money" when the topic is not specifically a dollar-using country is just nationalist bullshit.

There are more dead people who went to the moon than alive.

It's true that I can play games and do banking on my phone now though.

You're thinking of industrialization.

Capitalism systematically creates poverty both between countries (by extracting wealth from poorer countries) and within countries (by systematically depriving low income earners of adequate resources).

>Capitalism systematically creates poverty both between countries (by extracting wealth from poorer countries) and within countries (by systematically depriving low income earners of adequate resources).

This is the first time I have heard this. Usually the argument is that globalization creates a world middle class and drags each countries' middle class toward that world middle class. The world middle class is wealthier than the Chinese middle class so they get pulled up. The world middle class is less wealthy than the American middle class so they get pulled down.