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Comment by Karunamon | Hacker News Reader

The free market concept does work, but the problem is that it's reliant on an informed consumer. Marketers and the like try their best to shift that balance of power away - and they're very good at their job.

If you can't (or won't) make accurate value judgements on products, you'll lose every time. The house has the advantage, as it were.

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I didn't see the free market concept doesn't work. I said the efficient markets assumption is invalid. If you assume a rational actor you can make certain strong statements about the free market's ability to reach efficient equilibrium on its own. That's where the neigh-religious "if we just leave it be, the invisible hand will guide the market" talk comes from. Once we abandon the idea that people behave rationally, and the behavioral economics research we've seen over the last couple of decades forces us to abandon that idea, we can no longer make such strong statements. The "invisible hand" is leading us somewhere, but it's not necessarily to an efficient or even a stable equilibrium. We're forced into the morass of having to justify policy on its own merits, instead of invoking the religion of efficient markets.

I disagree with the sense that because a customer prefers a free dessert over a discount of greater nominal value, it is somehow inefficient.

Why does the customer visit the restaurant in the first place? To maximize efficiency? And this irrational act of a dessert makes it inefficient?

People value things in different ways, it's really a complex equation and you are over simplifying it. Maybe the experience of getting a free dessert is more valuable than saving the cash. It is a service business after all.

Free markets aren't always easy to understand, but they always give people more of what they want in aggregate than any mechanism of force.

> People value things in different ways, it's really a complex equation and you are over simplifying it.

I'm not the one oversimplifying it.

Similarly, the concept of democracy does work, but the problem is that it's reliant on an educated citizenry, which is unfortunately fading fast in the US.

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