Nobel economics winner says market forces flawed

[R.A. Hettinga]

"The market doesn't work very well when it comes to public goods," says a
newly minted Nobel Laureate in Economics.

Right.

There is *no* *such* *thing* as "public goods". If it doesn't have a price,
it isn't a "good".

This is why economics, is, for the most part, finance for politicians.

If we didn't have the "peculiar institution" of force-monopoly, "economics"
wouldn't exist. The theory of the firm, microeconomics, whatever, is
finance. Price theory is finance. The rest, where it can't be incorporated
wholesale into finance, is merely leftist hand-waving.

"Externalities are the last refuge of the dirigistes." -- Friedrich Hayek


Cheers,
RAH
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<http://www.reuters.com/article/newsOne/idUSN1538104320071015?sp=true>

Reuters



Nobel economics winner says market forces flawed

Mon Oct 15, 2007 4:47pm EDT

By Jon Hurdle

PRINCETON, New Jersey (Reuters) - Societies should not rely on market
forces to protect the environment or provide quality health care for all
citizens, a winner of the 2007 Nobel Prize for economics said on Monday.

Professor Eric Maskin, one of three American economists to receive the
award, said that he "to some extent" takes issue with free-market orthodoxy
championed by U.S President George W. Bush and some other western leaders.

"The market doesn't work very well when it comes to public goods," said
Maskin, a slight, soft-spoken 57-year-old who lives in a house once
occupied by Albert Einstein.

Maskin, together with Leonid Hurwicz of the University of Minnesota, and
Roger Myerson of the University of Chicago, received the prize for their
pioneering work on mechanism design theory which examines whether trading
mechanisms are the best ways of allocating resources.

In its statement with the award, the Royal Swedish Academy of Sciences said
the market's efficiency may be undermined because consumers are not
perfectly informed, competition is not completely free, and "privately
desirable production and consumption may generate social costs and
benefits."

"Markets work well with goods that economists call private goods" like cars
or other consumer durables, Maskin said in his office at the Institute for
Advanced Study in Princeton, New Jersey.

"If I buy a car, I use the car, you don't and the market for cars works
pretty well. But there are many other sorts of goods, often very important
goods, which are not provided well through the market. Often, these go
under the heading of public goods," he said.

"How do we ensure in the case of public goods that they are provided at
all, and that they are provided at the right level, taking into account
citizens' preferences?" he said.

A clean environment, for example, is not a private good in that "my
enjoyment of it doesn't preclude yours," he said.

"So the theory of mechanism design asks what sort of procedures or
mechanisms or institutions could be put in place which allow us to choose
the right level," he said.

Those mechanisms could include taxes to allow the more efficient provision
of public goods, he said.

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R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'