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>But it treats perfectly competitive markets as special cases rather than the norm, trying to incorporate from the very beginning the progress economists have m

by rtpg 9y ago

>But it treats perfectly competitive markets as special cases rather than the norm, trying to incorporate from the very beginning the progress economists have made during the past forty years or so in analyzing more complex situations: when firms have some monopoly power; people aren’t fully rational; a lot of key information is privately held; and the gains generated by trade, innovation, and finance are distributed very unevenly. The CORE curriculum also takes economic history seriously. This sounds excellent. I think "free market" is the worst-named concept ever, and has caused lasting damage since it sounds too much like "unregulated market". Acknowledging the spectrum of properties, and how unregulated markets don't end up free in a lot of important cases from the get-go will help to fight this damage.

quadrangle 9y ago
Don't you presume that "free market" is a term pushed mainly for propaganda reasons? It seems likely to me that the term is promoted specifically to promote anti-regulation politics. Think about it: if we're accepting the need for regulations, aren't we just talking about "market" rather than "free market"? The basic nature of "market" on its own already captures the idea that people are coming together and engaging in some sort of voluntary trade and competition etc. All the good stuff we care about is present in just "market" and the "free" part is the propaganda term.
- crdoconnor 9y ago
  Most economic assumptions are pushed for propaganda reasons. In physics you can assume the non-existence of friction and build a functioning model that approximates reality in certain situations. In economics, the existence of "perfect competition" or "perfect information" is simply fantastical, yet even at graduate level there are students building elaborate mathematical models with assumptions like these built in. The reason these things are 'assumed' is clearly not because it builds simple models that approximate reality in any situation. There are no markets with perfect information nor competition. It does function to conceal sources of profit, though.
  - al452 9y ago
    The reason people build those models with those assumptions isn't some great conspiracy, it's merely because under those assumptions it's actually feasible to build models. Building working mathematical models with imperfect information and imperfect competition and so on is a hell of a lot harder, mostly we don't know how to do it. Conspiracy theory is intellectually lazy.
    - sideshowb 9y ago
      Not necessarily hard. For example, perfect monopoly is as simple a model as perfect competition. Often it is closer to the truth. So why is it not used more?
      - icebraining 9y ago
        I took a basic Econ 101 class and they did model monopolies. Where are they not used?
        sideshowb 9y ago
        Every time somebody claims that raising minimum wage inevitably raises unemployment. Sure it does under assumptions of perfect competition but most labour markets are closer to monopsomy in this respect and the evidence is very mixed.
    - crdoconnor 9y ago
      It's not exactly a conspiracy, stuff like this happens in the open: https://www.theguardian.com/world/2014/sep/12/koch-brothers-sought-say-academic-hiring-university-donation https://www.theguardian.com/world/2014/sep/12/koch-brothers-... I'd characterize this behavior as "rational actors (economists) in a dysfunctional environment responding rationally to incentives, matching demand with a supply of politically useful economic models for wealthy special interests..." The ultimate outcome of this is Greenspan telling us "nobody saw the financial crisis coming" because economists in policymaking circles drank their own koolaid and almost entirely assumed away the existence of private debt in their models.
- rtpg 9y ago
  The thing is that the notion behind the word is useful! A lot of markets are mostly free, so theories engendered from it can work decently well. But we always need to remind ourselves that the spectrum exists, and that reality will not match the theory unless many conditions are met. A bit of a trite theory is that people in the right have so internalized the misconception that they now believe it.
- specialist 9y ago
  I learned there were just three kinds of markets: open, gray, and black. Freedom Markets™ is agitprop.
- afsina 9y ago
  They promote "anti government regulation". Otherwise for long therm success, voluntary market regulation by other market entities is almost always necessary.
ordbajsare 9y ago
Stop reading Marx
deleted 9y ago
[deleted]
norea-armozel 9y ago
The thing is that even Adam Smith and David Ricardo didn't believe free markets existed either, it's just that folks like Milton Friedman played up the idea that competition will always lead to better outcomes for firms and consumers. Markets are only good allocators when either the rules are set (and maintained) to ensure more fair outcomes or that the means of production are owned in common (cooperatives, mutual aid societies, etc). The former is what we've been using for a while but over time it seems those regulatory mechanisms get deconstructed by those who are regulated. So, I think it's time we choose to do the latter since it's obvious capitalism isn't a good model of market economics.
- quadrangle 9y ago
  This is all a very reasonable reply to my comment. I can only guess you're being downvoted by people who can't deal with the idea that markets and capitalism are fully separable.

by rtpg 9y ago

quadrangle 9y ago

Don't you presume that "free market" is a term pushed mainly for propaganda reasons? It seems likely to me that the term is promoted specifically to promote anti-regulation politics. Think about it: if we're accepting the need for regulations, aren't we just talking about "market" rather than "free market"? The basic nature of "market" on its own already captures the idea that people are coming together and engaging in some sort of voluntary trade and competition etc. All the good stuff we care about is present in just "market" and the "free" part is the propaganda term.

crdoconnor 9y ago
Most economic assumptions are pushed for propaganda reasons. In physics you can assume the non-existence of friction and build a functioning model that approximates reality in certain situations. In economics, the existence of "perfect competition" or "perfect information" is simply fantastical, yet even at graduate level there are students building elaborate mathematical models with assumptions like these built in. The reason these things are 'assumed' is clearly not because it builds simple models that approximate reality in any situation. There are no markets with perfect information nor competition. It does function to conceal sources of profit, though.
- al452 9y ago
  The reason people build those models with those assumptions isn't some great conspiracy, it's merely because under those assumptions it's actually feasible to build models. Building working mathematical models with imperfect information and imperfect competition and so on is a hell of a lot harder, mostly we don't know how to do it. Conspiracy theory is intellectually lazy.
  - sideshowb 9y ago
    Not necessarily hard. For example, perfect monopoly is as simple a model as perfect competition. Often it is closer to the truth. So why is it not used more?
    - icebraining 9y ago
      I took a basic Econ 101 class and they did model monopolies. Where are they not used?
      - sideshowb 9y ago
        Every time somebody claims that raising minimum wage inevitably raises unemployment. Sure it does under assumptions of perfect competition but most labour markets are closer to monopsomy in this respect and the evidence is very mixed.
  - crdoconnor 9y ago
    It's not exactly a conspiracy, stuff like this happens in the open: https://www.theguardian.com/world/2014/sep/12/koch-brothers-sought-say-academic-hiring-university-donation https://www.theguardian.com/world/2014/sep/12/koch-brothers-... I'd characterize this behavior as "rational actors (economists) in a dysfunctional environment responding rationally to incentives, matching demand with a supply of politically useful economic models for wealthy special interests..." The ultimate outcome of this is Greenspan telling us "nobody saw the financial crisis coming" because economists in policymaking circles drank their own koolaid and almost entirely assumed away the existence of private debt in their models.
rtpg 9y ago
The thing is that the notion behind the word is useful! A lot of markets are mostly free, so theories engendered from it can work decently well. But we always need to remind ourselves that the spectrum exists, and that reality will not match the theory unless many conditions are met. A bit of a trite theory is that people in the right have so internalized the misconception that they now believe it.
specialist 9y ago
I learned there were just three kinds of markets: open, gray, and black. Freedom Markets™ is agitprop.
afsina 9y ago
They promote "anti government regulation". Otherwise for long therm success, voluntary market regulation by other market entities is almost always necessary.

ordbajsare 9y ago

Stop reading Marx

deleted 9y ago

[deleted]

norea-armozel 9y ago

The thing is that even Adam Smith and David Ricardo didn't believe free markets existed either, it's just that folks like Milton Friedman played up the idea that competition will always lead to better outcomes for firms and consumers. Markets are only good allocators when either the rules are set (and maintained) to ensure more fair outcomes or that the means of production are owned in common (cooperatives, mutual aid societies, etc). The former is what we've been using for a while but over time it seems those regulatory mechanisms get deconstructed by those who are regulated. So, I think it's time we choose to do the latter since it's obvious capitalism isn't a good model of market economics.

quadrangle 9y ago
This is all a very reasonable reply to my comment. I can only guess you're being downvoted by people who can't deal with the idea that markets and capitalism are fully separable.