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I think the implied moral imperative is generally taken to be "markets should be freely competitive"; everything else is details. Prices not dropping is just an

I think the implied moral imperative is generally taken to be "markets should be freely competitive"; everything else is details. Prices not dropping is just an indicator that a market isn't competitive due to, e.g., barriers to entry or government interference. Of course, not everyone thinks free markets are morally preferable, so it's not really an imperative that applies universally.

netcan 17y ago
I see what you're saying, but I don't buy it. I think if you look at the contexts where the normative statement appears , you'll find that it is a genuine mix up, not an indirect criticism of restricted markets. I wouldn't be surprised if criticism of restricted markets is part of where this comes from but it is not a rational path. Even a perfectively free market is not perfectly competitive. Perfectly competitive is a theoretical position used by economics, but it is theoretical. Perfectly competitive means profits are consistently zero, for example. If I have a nicer smile then the girl at the next shop and you prefer to shop at my shop, that's an "obstruction" preventing perfectly competitive markets. The only markets that approach perfect competition in reality are commodity markets where, by definition, all products are perfectly equivalent. This makes it even harder to get from "prices equal marginal costs if markets are perfectly competitive" to "prices prices should equal (or sometimes 'reflect') marginal costs." The implication is not just "remove government enforced barriers to competition" it is also "remove differences between you and competitors" and absurdities like "hire the same person as your competitors." Perfect competition requires perfect substitutes (competitors). Imagine a "product" that uses necessarily non-uniform inputs: a seminar. One has Jimmy Carter speaking. The other has Mohammad Khatami. For this market to be perfectly competitive, the speakers (and the location and the coffee, etc) would have to be exactly equivalent.
- ytinas 17y ago
  >Even a perfectively free market is not perfectly competitive. Perfectly competitive is a theoretical position used by economics, but it is theoretical. Exactly. I wish more free market advocates understood this.

netcan 17y ago

I see what you're saying, but I don't buy it. I think if you look at the contexts where the normative statement appears , you'll find that it is a genuine mix up, not an indirect criticism of restricted markets. I wouldn't be surprised if criticism of restricted markets is part of where this comes from but it is not a rational path. Even a perfectively free market is not perfectly competitive. Perfectly competitive is a theoretical position used by economics, but it is theoretical. Perfectly competitive means profits are consistently zero, for example. If I have a nicer smile then the girl at the next shop and you prefer to shop at my shop, that's an "obstruction" preventing perfectly competitive markets. The only markets that approach perfect competition in reality are commodity markets where, by definition, all products are perfectly equivalent. This makes it even harder to get from "prices equal marginal costs if markets are perfectly competitive" to "prices prices should equal (or sometimes 'reflect') marginal costs." The implication is not just "remove government enforced barriers to competition" it is also "remove differences between you and competitors" and absurdities like "hire the same person as your competitors." Perfect competition requires perfect substitutes (competitors). Imagine a "product" that uses necessarily non-uniform inputs: a seminar. One has Jimmy Carter speaking. The other has Mohammad Khatami. For this market to be perfectly competitive, the speakers (and the location and the coffee, etc) would have to be exactly equivalent.

ytinas 17y ago
>Even a perfectively free market is not perfectly competitive. Perfectly competitive is a theoretical position used by economics, but it is theoretical. Exactly. I wish more free market advocates understood this.