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A lot of Americans are obsessed with "capitalism" and "the free market", but don't even understand the basic assumptions that must be true for free markets to w

A lot of Americans are obsessed with "capitalism" and "the free market", but don't even understand the basic assumptions that must be true for free markets to work like perfect information, interchangeable goods and services, and a lack of market power for any single entity. Like, the basic—the most basic—assumptions. Capitalism has become synonymous in the collective mind with "don't make laws, laws are government interference and socialism." Just look at the way people on the right talk about removing Obamacare and letting the "free market" do its thing. But the healthcare industry basically NEVER met the assumptions necessary for a free market to exist in the first place. The same is true in banking, albeit some might argue to a lesser extent. You've got oligopoly or monopoly firms in many industries that are "too big to fail", have near total market power, and make many decisions (some around pricing) behind closed doors or with little transparency (let alone anything close to complete information), and then expect markets to run efficiently? You can't bake the perfect cake if you don't have any of the ingredients in the first place.

deleted 11y ago
[deleted]
ancap 11y ago
>But the healthcare industry basically NEVER met the assumptions necessary for a free market to exist in the first place. Please expound on the history of this (the "NEVER" part)and also enumerate on what the "assumptions necessary" are. >Just look at the way people on the right talk about removing Obamacare and letting the "free market" do its thing. Obviously the removal of Obamacare would be insufficient to produce a free market in health care and it would take a lot more repealing of laws (many at the state level) before a free market could "do its thing". >Capitalism has become synonymous in the collective mind with "don't make laws, laws are government interference and socialism." I'm not so sure there is any majority which claims this. I find much more common the idea that most of society's problems are caused by capitalism, caused by a "market failure", or that free enterprise is insufficient to resolve said problem and the only solution is government action.
- themagician 11y ago
  With the exception of Kaiser and a few other smaller providers, pricing in healthcare is completely opaque. Consumers can't make informed decisions because they essentially have no information. In most cases if you call a provider and ask what the price of something is they can't tell you. It's a myriad of "what insurance you do have" and "it depends".
  - ancap 11y ago
    I would suspect that was not the case 50 years ago. There are plenty of "medical tourist" destinations where you can go to get a very complicated medical procedure done and they will tell you exactly how much it will cost before hand. From a U.S. physician's perspective, knowing what insurance you have is obviously going to be a prerequisite to estimating the cost (unless its one of the rare doctors who accepts no insurance). Different insurances cover different things, different providers, different procedures, different prescriptions, then there's the issue of deductibles, contracted costs, etc. It's a complicated mess, and while I don't know enough about the laws affecting health insurance companies and doctors, I would suspect there are regulations which exasperate the problem. Clearly Obamacare (mandating everyone have insurance) is not going to fix the problem.
kbenson 11y ago
Perfect information is not required for a free market. Market efficiency is related to information availability though. That is, perfect information and zero cost transactions are some of the requirements for a maximally efficient market, but a market can be "good" or "good enough" to outperform other systems without perfect information (which is impossible), or zero cost transactions.
goodcanadian 11y ago
A little rant that I have been saving up: "Capitalism" is not the same thing as "free market" is not the same thing as "laissez faire." A "free market" means lots of buyers and sellers participating on even playing field. Even Adam Smith acknowledged that government regulation is necessary in order to ensure that the market remains free. When people argue for the removal of laws and regulation, they are actually arguing for laissez faire economics which, in a nutshell, means for the government to stay out of it. Left to their own devices, however, capitalists will naturally (and rationally) try to tilt the playing field in their favour. Capitalism, for what it is worth, is people investing their free capital into economic enterprises in order to glean a return. So, I am, actually, a strong proponent of capitalism operating under free markets. I am against capitalism, however, under a completely laissez faire economy.
- vezzy-fnord 11y ago
  A "free market" means lots of buyers and sellers participating on even playing field. I've never seen this definition used before. Even playing field is a grossly inappropriate and unattainable normative ideal. Even playing field means homogenization, which is completely antithetical to a market as a vehicle for coordinating entrepreneurial plans, necessarily implying imperfections and heterogeneity. Even Adam Smith acknowledged that government regulation is necessary in order to ensure that the market remains free. Regulation is certainly necessary, at least in the sense of property rights enforcement and dispute adjudication. Government regulation it need not be, and it need not be anything more than a minimal legal institutional framework. Left to their own devices, however, capitalists will naturally (and rationally) try to tilt the playing field in their favour. How did you reach this conclusion? It makes no sense whatsoever. If anything, we would expect this behavior to occur only where there are large amounts of government regulation. That is to say, when there is more opportunity to exploit the political method over the economic method. Otherwise, how will they tilt the playing field? By forming cartels? Those are brittle. Any attempt at trying to use market power leaves you vulnerable to undercutting in some way in the absence of special privileges. I am against capitalism, however, under a completely laissez faire economy. Your taxonomy is worthless.
  - 11y ago
raverbashing 11y ago
True I think that Healthcare would solve 95% of its problems with a truly Free Market, but to have that you need a very strict law enforcing fair and transparent rules to all (like mandatory transparent pricing), elimination of bottlenecks (like MD graduation and facilitate hiring from overseas), liability and regulation limitation and other things.
- themagician 11y ago
  You will never get there. It's just unrealistic. There are products that are too specialized and have no competition. There are long term contracts that prevent all sorts of efficiencies. There are parts of the supply chain that operate on timelines measured in decades.
  - raverbashing 11y ago
    Everywhere else works better > There are long term contracts that prevent all sorts of efficiencies. Yeah, then those who signed those contracts will be less efficient, and maybe go bankrupt. That happens in several cases, not limited to healthcare
    - themagician 11y ago
      You really don't want necessary healthcare companies going bankrupt on a regular basis. Perhaps healthcare could be efficient on a long enough time scale. When we all live to 1,000 years old maybe it won't matter so much.
zacharytelschow 11y ago
> But the healthcare industry basically NEVER met the assumptions necessary for a free market to exist in the first place. Has it occurred to you that regulation might have something to do with that?
- clock_tower 11y ago
  But what's the alternative? Even physicians haven't consistently self-regulated -- and if you don't have regulation, you get incompetent amateurs and snake-oil salesmen (like the contemporary sellers of homeopathic cures) passing themselves off as doctors and defrauding the sick.
vezzy-fnord 11y ago
"Perfect information" is an assumption used in static Paretian general equilibrium models, but it does not reflect any existing dynamic reality, and it is not at all a necessary prerequisite for free markets. Market power is vulnerable. "Interchangeable goods and services" - I honestly have no idea how you could come up with such a delusional prerequisite. You seem to have confused neoclassical models for an attainable ideal compatible with empirical reality. But our world is one of disequilibrium, dispersed knowledge, plan coordination - ones most apt for a market and a free one at that. You are completely out of vogue.

deleted 11y ago

[deleted]

ancap 11y ago

>But the healthcare industry basically NEVER met the assumptions necessary for a free market to exist in the first place. Please expound on the history of this (the "NEVER" part)and also enumerate on what the "assumptions necessary" are. >Just look at the way people on the right talk about removing Obamacare and letting the "free market" do its thing. Obviously the removal of Obamacare would be insufficient to produce a free market in health care and it would take a lot more repealing of laws (many at the state level) before a free market could "do its thing". >Capitalism has become synonymous in the collective mind with "don't make laws, laws are government interference and socialism." I'm not so sure there is any majority which claims this. I find much more common the idea that most of society's problems are caused by capitalism, caused by a "market failure", or that free enterprise is insufficient to resolve said problem and the only solution is government action.

themagician 11y ago
With the exception of Kaiser and a few other smaller providers, pricing in healthcare is completely opaque. Consumers can't make informed decisions because they essentially have no information. In most cases if you call a provider and ask what the price of something is they can't tell you. It's a myriad of "what insurance you do have" and "it depends".
- ancap 11y ago
  I would suspect that was not the case 50 years ago. There are plenty of "medical tourist" destinations where you can go to get a very complicated medical procedure done and they will tell you exactly how much it will cost before hand. From a U.S. physician's perspective, knowing what insurance you have is obviously going to be a prerequisite to estimating the cost (unless its one of the rare doctors who accepts no insurance). Different insurances cover different things, different providers, different procedures, different prescriptions, then there's the issue of deductibles, contracted costs, etc. It's a complicated mess, and while I don't know enough about the laws affecting health insurance companies and doctors, I would suspect there are regulations which exasperate the problem. Clearly Obamacare (mandating everyone have insurance) is not going to fix the problem.

kbenson 11y ago

Perfect information is not required for a free market. Market efficiency is related to information availability though. That is, perfect information and zero cost transactions are some of the requirements for a maximally efficient market, but a market can be "good" or "good enough" to outperform other systems without perfect information (which is impossible), or zero cost transactions.

goodcanadian 11y ago

A little rant that I have been saving up: "Capitalism" is not the same thing as "free market" is not the same thing as "laissez faire." A "free market" means lots of buyers and sellers participating on even playing field. Even Adam Smith acknowledged that government regulation is necessary in order to ensure that the market remains free. When people argue for the removal of laws and regulation, they are actually arguing for laissez faire economics which, in a nutshell, means for the government to stay out of it. Left to their own devices, however, capitalists will naturally (and rationally) try to tilt the playing field in their favour. Capitalism, for what it is worth, is people investing their free capital into economic enterprises in order to glean a return. So, I am, actually, a strong proponent of capitalism operating under free markets. I am against capitalism, however, under a completely laissez faire economy.

vezzy-fnord 11y ago
A "free market" means lots of buyers and sellers participating on even playing field. I've never seen this definition used before. Even playing field is a grossly inappropriate and unattainable normative ideal. Even playing field means homogenization, which is completely antithetical to a market as a vehicle for coordinating entrepreneurial plans, necessarily implying imperfections and heterogeneity. Even Adam Smith acknowledged that government regulation is necessary in order to ensure that the market remains free. Regulation is certainly necessary, at least in the sense of property rights enforcement and dispute adjudication. Government regulation it need not be, and it need not be anything more than a minimal legal institutional framework. Left to their own devices, however, capitalists will naturally (and rationally) try to tilt the playing field in their favour. How did you reach this conclusion? It makes no sense whatsoever. If anything, we would expect this behavior to occur only where there are large amounts of government regulation. That is to say, when there is more opportunity to exploit the political method over the economic method. Otherwise, how will they tilt the playing field? By forming cartels? Those are brittle. Any attempt at trying to use market power leaves you vulnerable to undercutting in some way in the absence of special privileges. I am against capitalism, however, under a completely laissez faire economy. Your taxonomy is worthless.
- 11y ago

raverbashing 11y ago

True I think that Healthcare would solve 95% of its problems with a truly Free Market, but to have that you need a very strict law enforcing fair and transparent rules to all (like mandatory transparent pricing), elimination of bottlenecks (like MD graduation and facilitate hiring from overseas), liability and regulation limitation and other things.

themagician 11y ago
You will never get there. It's just unrealistic. There are products that are too specialized and have no competition. There are long term contracts that prevent all sorts of efficiencies. There are parts of the supply chain that operate on timelines measured in decades.
- raverbashing 11y ago
  Everywhere else works better > There are long term contracts that prevent all sorts of efficiencies. Yeah, then those who signed those contracts will be less efficient, and maybe go bankrupt. That happens in several cases, not limited to healthcare
  - themagician 11y ago
    You really don't want necessary healthcare companies going bankrupt on a regular basis. Perhaps healthcare could be efficient on a long enough time scale. When we all live to 1,000 years old maybe it won't matter so much.

zacharytelschow 11y ago

> But the healthcare industry basically NEVER met the assumptions necessary for a free market to exist in the first place. Has it occurred to you that regulation might have something to do with that?

clock_tower 11y ago
But what's the alternative? Even physicians haven't consistently self-regulated -- and if you don't have regulation, you get incompetent amateurs and snake-oil salesmen (like the contemporary sellers of homeopathic cures) passing themselves off as doctors and defrauding the sick.

vezzy-fnord 11y ago

"Perfect information" is an assumption used in static Paretian general equilibrium models, but it does not reflect any existing dynamic reality, and it is not at all a necessary prerequisite for free markets. Market power is vulnerable. "Interchangeable goods and services" - I honestly have no idea how you could come up with such a delusional prerequisite. You seem to have confused neoclassical models for an attainable ideal compatible with empirical reality. But our world is one of disequilibrium, dispersed knowledge, plan coordination - ones most apt for a market and a free one at that. You are completely out of vogue.