3 ms·

Access to information is a pretty big requirement to a free market. In fact models of the free market assume "perfect information". https://en.wikipedia.org/wi

by mox1 8y ago

Access to information is a pretty big requirement to a free market. In fact models of the free market assume "perfect information". https://en.wikipedia.org/wiki/Perfect_information https://en.wikipedia.org/wiki/Perfect_information

dfee 8y ago
I can’t find anything on there that supports the idea that free markets are modeled on “perfect information”. I wouldn’t think that’s the case, anyway. Because marketing/advertising/awareness is a cost with diminishing returns, meaning it’s be prohibitively expensive to inform everyone of your product in the market, much less make accessible ALL products in a category for comparison shopping for any customer at any given time (aside from a singularity event). I do think markets require some information liquidity to be maintainable, and I generally understand free markets to be free of coercion. This sounds more like an “transparent market” though I’m not sure that’s a defined concept.
- dfee 8y ago
  So after some light reading, theoretical free markets are predicated on complete information, and known to be impossible to achieve for the reason I mentioned. Interesting.
  - themagician 8y ago
    We assume "perfect information" because that's what lets us create simply supply and demand functions. Obviously in the real world you rarely (if ever) have perfect information—and we have models to deal with that—but healthcare has almost zero information. You either can't make a choice because you literally can't (only one provider in your area) or you can't make a choice because you don't have pricing information. So you can't maximize your own utility, because you don't know what options lead to that outcome. Just about the ONLY assumption that holds true in healthcare is that firms maximize profits. And, in a twist of irony, the only healthcare provider to provide information on pricing is Kaiser Permanente—which is a non-profit. Yeah, they still do maximize profits, but not for shareholders. So you could make the argument that healthcare as a whole meets exactly zero of the assumptions necessary for any kind of free market model to apply.
frgtpsswrdlame 8y ago
Those aren't free market models, those are 'perfect competition' models. They're not the same thing.
- themagician 8y ago
  They are. A free market model typically has five basic assumptions built into it. See my comment above.
  - frgtpsswrdlame 8y ago
    No. >Pick up any text book and before you even get to supply and demand you will go through the "assumptions" that must be true in order for a free market to function. You will go through the assumptions that must be true in order for a market to be in a state of perfect competition. Most econ books should be pretty good about this lanugage. 'Free market' is actually more about political philosophy than economics although it's usually cloaked in the language of normative economics.
    - themagician 8y ago
      Perfect competition is typically listed as an assumption of a free market. I mean, at least when I was a TA.

by mox1 8y ago

dfee 8y ago

I can’t find anything on there that supports the idea that free markets are modeled on “perfect information”. I wouldn’t think that’s the case, anyway. Because marketing/advertising/awareness is a cost with diminishing returns, meaning it’s be prohibitively expensive to inform everyone of your product in the market, much less make accessible ALL products in a category for comparison shopping for any customer at any given time (aside from a singularity event). I do think markets require some information liquidity to be maintainable, and I generally understand free markets to be free of coercion. This sounds more like an “transparent market” though I’m not sure that’s a defined concept.

dfee 8y ago
So after some light reading, theoretical free markets are predicated on complete information, and known to be impossible to achieve for the reason I mentioned. Interesting.
- themagician 8y ago
  We assume "perfect information" because that's what lets us create simply supply and demand functions. Obviously in the real world you rarely (if ever) have perfect information—and we have models to deal with that—but healthcare has almost zero information. You either can't make a choice because you literally can't (only one provider in your area) or you can't make a choice because you don't have pricing information. So you can't maximize your own utility, because you don't know what options lead to that outcome. Just about the ONLY assumption that holds true in healthcare is that firms maximize profits. And, in a twist of irony, the only healthcare provider to provide information on pricing is Kaiser Permanente—which is a non-profit. Yeah, they still do maximize profits, but not for shareholders. So you could make the argument that healthcare as a whole meets exactly zero of the assumptions necessary for any kind of free market model to apply.

frgtpsswrdlame 8y ago

Those aren't free market models, those are 'perfect competition' models. They're not the same thing.

themagician 8y ago
They are. A free market model typically has five basic assumptions built into it. See my comment above.
- frgtpsswrdlame 8y ago
  No. >Pick up any text book and before you even get to supply and demand you will go through the "assumptions" that must be true in order for a free market to function. You will go through the assumptions that must be true in order for a market to be in a state of perfect competition. Most econ books should be pretty good about this lanugage. 'Free market' is actually more about political philosophy than economics although it's usually cloaked in the language of normative economics.
  - themagician 8y ago
    Perfect competition is typically listed as an assumption of a free market. I mean, at least when I was a TA.