It also assumes everyone has the same power, which is false
And that everyone has perfect infinite information, which is impossible.
And that externalities are irrelevant, which is false
And that all options are equally accessible, which doesn't exist.
And that people act in perfectly rational objective ways, which isn't how humans behave.
And that everyone instantaneously knows the utility maximization function of all potential transactions, which doesn't ever happen either.
And that firms will always prefer competition over cooperation, which is the exact opposite of reality.
And that any tricks such as cornering, price fixing, ramping, runs, pump and dumps, luring, spoofing, churning, pools, don't exist, which is also false.
The foundation it's built on is a fundamental fiction. Conclusions based on it occasionally resembling reality are exceedingly rare and merely coincidental - it's like a form of astrology with more equations and charts.
And the real clincher is the advocates are only interested in defending their ideological agenda like some kind of religious zealot.
When anyone walks in thinking they already have the answer before hearing any of the questions, watch out - especially if it's the same exact answer every time.
And you believe government regulations resolves all of the problems you perceive to be wrong with a free market economy?
You believe this despite 1000's of years of history proving centrally planned economies fail every time?
Even with in the COVID crisis we have example after example of governments in the US, and out of the US, State level, and Federal level making the exactly wrong choices.
We also have many examples of the market opening up avenues of innovation and surplus in PPE and Testing
I am sure the obvious thing to you is "just elect better" but that is akin to your statement about "the real clincher is the advocates are only interested in defending their ideological agenda" or even "When anyone walks in thinking they already have the answer before hearing any of the questions, watch out -" where the answer to all questions is "more Government Regulations"
No I am not, pointing out problems in a given system is easy, the question is what system do you replace it with that does not have those problems?
The Free Market is not perfect, but it is the best model we know of, replacing it with Centrally planned economy and high government regulations has proven time and time again to produce worse economic outputs and often times costs millions of lives
Systems that have tried to work toward it are extremely centrally planned and heavily regulated such as the NYSE.
Retail plans to have a free market exchange, say of healthcare providers, say, in the affordable care act, also have lots of central planning and government regulation.
The efforts to get to a free market have been some of the most complexly planned and regulated government systems ever created.
It's necessary to try to secure the required guarantees. How are you going to get everyone to agree on the same way of informing a price? How are you going to get equal access to all options? How are you going to get a friction free transfer? Make sure firms stay competing and not carteling, collaborating, or colluding etc ... the answer is government government government. These things don't happen on their own.
>>Retail plans to have a free market exchange, say of healthcare providers, say, in the affordable care act, also have lots of central planning and government regulation.
What??? How in any way in a Centrally planned market a "free market exchange"?
Nothing in ACA is a free market, NOTHING. and NOTHING in ACA had a goal or desire to create a free market exchange, it was expressly anti-free market with the goal to be one step closer to Single Payer
>How are you going to get everyone to agree on the same way of informing a price?
I am not sure you understand what a free market is, or would look like if your are asking this question.
Huh? No, the Heritage Foundation in 1989 proposed the individual mandate as an alternative to single-payer health care - explicitly as a way to avoid it not as a path toward it. That's why it's in there.
It's based on models by the Hudson Institute and the Heritage Foundation, free-market think tanks and is partially based on the Republican Massachusetts plan from 2006.
The inability of republicans to replace the plan over the past decade is because the plan as it stands was more or less the Free Market proposed alternative to a European style system by their leading advocacy groups circa 2009.
And still, against all your strongly held beliefs and preconceived notions, free markets not only work, but they created all the useful stuff we use every day while lifting the whole of humankind out of abject poverty.
> And still, against all your strongly held beliefs and preconceived notions, free markets not only work, but they created all the useful stuff we use every day while lifting the whole of humankind out of abject poverty.
And they did that because they weren't 100% "free", but were regulated.
Imagine someone who said this: "Fire is good. It heats our homes, it cooks our food, it runs our cars and our industry and lets us travel quickly from one place to another. So let's get rid of all fire departments and all forest control services, and let fire be as efficient as it can be."
That's obviously a stupid position to take. Fire is neither good nor bad; it's a force that can be incredibly powerful when harnessed for good, and incredibly destructive when allowed to run rampant. And there are times when it's simply not the right tool for the job.
Markets are the same way. Talking about the "free market" is a bit silly: All markets have constraints, either natural or artificial, and they optimize based on those constraints. When appropriately channeled, they can be a powerful force for allocation of resources and experimentation. When not appropriately controlled, they can destroy environments and harm society. And sometimes it's simply not the right tool for the job.
> Price controls is not regulating markets, is completely closing them. Putting out the fire, not harnessing it.
Well, no. People manufacturing masks still have a choice as to whether to make masks at the price-controlled price or not. If it's not cost-effective, they won't make any. If it's adequately cost-effective, they'll make the normal amount. If the price controls are still fairly lucrative, they'll be encouraged to make more product.
On the other hand, the knowledge that there will be no limits on "surge pricing" might encourage people to build up stockpiles to smooth out shocks in supply or demand; whereas, the knowledge that there will be limits on "surge pricing" might discourage people from building up stockpiles, thus making shocks in supply or demand worse.
In both cases, "the market" is still doing what the market does: optimizing for the particular inputs it's given. The question is, which outcome do we prefer?
EDIT: And, is the market actually the right tool for this particular job?
For instance, in the case of vital medical equipment such as N95 masks, maybe it makes sense to have the government stockpile reserves, rather than relying on the market to do it.
I don’t know, but it looks to me that through that Reserve even the government understood that price controls don’t work and tried to solve the problem working with the market rather than against it.
Things like the Agricultural Adjustment Act came about because Overproduction of commodities (in this case crops) lead to its collapse. The prices go down decreasing the margin so the producers put more in the market, pushing the price down further, reducing their margins further, leading to unpayable debts and bankruptcies.
An abundance of commodities disrupts the conditions for the creation of profits. Nobody really disputes the overproduction phenomena and consequences. At the macro-scale this can have a contagion effect and cause what's called a "general glut" identified by both Smith and Ricardo.
We saw that in the shale oil bust just recently. Price controls and making the government the buyer of last resort (for instance, the Commodity Credit Corporation) are remedies for fixing this flaw. They are there because of a fundamental flaw in market economics.
Being an entrepreneur is risky. Planning your production is just one of those risks. Some will fail and go out of business. Others will take their place. The market will endure. The consumers will benefit.
Adam Smiths' theory of the general glut is they won't. It's a vicious cycle effect that can lead to phenomena called recessions and depressions resulting in strangely both unemployment and idle factories (able workers + money to pay them and nobody hiring due to lack of demand).
Some really ardent neo-classicalists say they don't exist but I haven't read their evidence carefully enough to speak to it (here's an intro by Rothbard if you're interested: https://mises.org/library/says-law-markets)
I personally think some of the most notable Austrians had a bad habit of using arguments of convenience to defend the financial interests of the wealthy benefactors who funded their institutions and reversed their arguments when expedient but that's a separate conversation.
Being an entrepreneur is risky? What risk does an entrepreneur take? That they'll lose all their capital, right? Well, that just puts them on even footing with workers, who are people who have no way to make money other than selling their labor.
The majority of people are workers. You're telling me the "risk" an entrepreneur takes is being on equal footing with their (former) employees? Man, you're making a great argument against capitalism, if that's what you're saying.
Not even. It's a corporation you can walk away from it.
The risk narrative is the current preferred reason to justify gross inequality caused by power imbalances.
It ignores that every participant is taking a risk. It's just some manufactured narrative designed so that we'd think "well alright" and not question the unjustifiable disproportionate gross inequity of all the reward going to those with the smallest risk because of how structural power works.
The lowest wage worker living paycheck to paycheck has wayyyy more risk exposure than someone like me who has skated by trivially without a paycheck for over a year. The idea that my investment portfolio entitles me to the profits because of some immense risk I'm taking is clearly totally manufactured bullshit that's used to shape public opinion.
I could lose every penny without affecting my quality of life at all. Literally zero effect. The risk is purely abstract. It's not material in the slightest
I actually mostly agree with you: more workers should try entrepreneurship, it's not as risky or as hard as it may seem.
Entrepreneurs also risk their time which employees usually prefer to sell at guaranteed return. But some choose middle ground by accepting a mixed (cash + stock) compensation.
I believe we, as a society, would gain more if more people would "risk" the entrepreneurial path.
But they don't exist and they never have because of all the things I pointed out.
The premise of your argument is incorrect because they are not real. The free market is an impossible theoretical intellectual exercise and nothing more.
Show me where all participants instantaneously knows the utility maximization function of all potential transactions and exercises individual maximization with friction free transfers based on perfect infinite information and we can more forward with your argument.
Otherwise you're simply attributing unspecific generalities to a fiction.
Now you've changed the topic. Free Market and Capitalism aren't the same thing. Capitalism exists, free markets do not. We're talking about a specific theory in the Austrian School.
The task is still on you to demonstrate how the free market isn't a fiction.
No, the task is still on you to defend your strange belief in the nonexistence of free markets.
I went into a small one this very morning, to buy some apples and eggs. Looked very real to me. And free: nobody told the sellers at which price to sell and nobody made me buy if I didn’t like it.
Yeah, I am using the generally accepted and recognized meaning in conversations around the world. I am not interested in the current trend of twisting the definition of a word until it fits your preconceived notions.
And that everyone has perfect infinite information, which is impossible.
And that externalities are irrelevant, which is false
And that all options are equally accessible, which doesn't exist.
And that people act in perfectly rational objective ways, which isn't how humans behave.
And that everyone instantaneously knows the utility maximization function of all potential transactions, which doesn't ever happen either.
And that firms will always prefer competition over cooperation, which is the exact opposite of reality.
And that any tricks such as cornering, price fixing, ramping, runs, pump and dumps, luring, spoofing, churning, pools, don't exist, which is also false.
The foundation it's built on is a fundamental fiction. Conclusions based on it occasionally resembling reality are exceedingly rare and merely coincidental - it's like a form of astrology with more equations and charts.
And the real clincher is the advocates are only interested in defending their ideological agenda like some kind of religious zealot.
When anyone walks in thinking they already have the answer before hearing any of the questions, watch out - especially if it's the same exact answer every time.