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I think the biggest problem of free markets is that they a great way to optimize the wrong thing. Anything that cannot be valued in money will be ignored (e.g.

I think the biggest problem of free markets is that they a great way to optimize the wrong thing. Anything that cannot be valued in money will be ignored (e.g. the environment), and what can be measured will fall victim of Goodhart's law, promoting narrow short-term interests over broad long-term issues.

someguyorother 5y ago
As an optimization mechanism, failures of the market can be either one of two things: - It optimizes the wrong thing, or - It fails to optimize what it intends to optimize. Externalities fit into the former category. Business cycles and some types of path dependence (e.g. Keynesian demand deficiency) fit into the latter.
- gatestone 5y ago
  The book is not juridically or economically naive. Externalities are considered. The book is also not about moral philosophy and a priori concepts of property and freedom. Friedman is utilitarian, trying to figure the "machinery", like right property institutions and laws for difficult things like pricing carbon exhausts.
jokethrowaway 5y ago
The book talks about the environment - and damage to the environment can definitely be quantified and you should definitely be able to agree on limits (or sue) with your neighbours. A third party judge could agree on the decision. Long term issues are factored in the market. People will have different options about long term issues. Eg. If people think that global warming will be a problem for my house in 50 years that risk will be factored in the price of my house. If that risk doesn't materialise I may undersell my house. Long term prediction are definitely not easy and the market reflects that difficulty.
- blackbear_ 5y ago
  > The book talks about the environment - and damage to the environment can definitely be quantified and you should definitely be able to agree on limits (or sue) with your neighbours. A third party judge could agree on the decision. It is much harder than that. You can certainly sue a local company for obvious pollution (which is must be visible in the short-term), but who to sue for the dying coral reef, melting glaciers, bee extinction, or the increase in the incidence of lung cancer? We can measure these things, but who pays for them, and how much? Even Friedman agrees (implicitly) this issue is above free markets, via carbon pricing, meaning that: > Who gets away with it depends not on real costs but on politics.
  - BurningFrog 5y ago
    I think DF will acknowledge most of those points, but also point out that current non market political systems don't handle them well either. IOW, these problems may not have a great real world solution...
  - jokethrowaway 5y ago
    It is definitely a hard problem; we're not solving it at all in the current system. Look at how big oil colluded with the government and pushed for plastic we can't really recycle. If we can measure it and trace it back to polluting companies, everyone should be able to pool their collective power, via their dispute resolution agencies, and demand a trial, imposing fines, limits and what not. It's not going to be easy, but it won't be harder than it is now: corruption should be harder with competing dispute resolution agencies and customers can actually walk away and stop paying them if they don't act in their interest.
dantheman 5y ago
Except that's not what happens in reality - the environment is a luxury good. It is taken care of best in capitalist/free market environments.

someguyorother 5y ago

As an optimization mechanism, failures of the market can be either one of two things: - It optimizes the wrong thing, or - It fails to optimize what it intends to optimize. Externalities fit into the former category. Business cycles and some types of path dependence (e.g. Keynesian demand deficiency) fit into the latter.

gatestone 5y ago
The book is not juridically or economically naive. Externalities are considered. The book is also not about moral philosophy and a priori concepts of property and freedom. Friedman is utilitarian, trying to figure the "machinery", like right property institutions and laws for difficult things like pricing carbon exhausts.

jokethrowaway 5y ago

The book talks about the environment - and damage to the environment can definitely be quantified and you should definitely be able to agree on limits (or sue) with your neighbours. A third party judge could agree on the decision. Long term issues are factored in the market. People will have different options about long term issues. Eg. If people think that global warming will be a problem for my house in 50 years that risk will be factored in the price of my house. If that risk doesn't materialise I may undersell my house. Long term prediction are definitely not easy and the market reflects that difficulty.

blackbear_ 5y ago
> The book talks about the environment - and damage to the environment can definitely be quantified and you should definitely be able to agree on limits (or sue) with your neighbours. A third party judge could agree on the decision. It is much harder than that. You can certainly sue a local company for obvious pollution (which is must be visible in the short-term), but who to sue for the dying coral reef, melting glaciers, bee extinction, or the increase in the incidence of lung cancer? We can measure these things, but who pays for them, and how much? Even Friedman agrees (implicitly) this issue is above free markets, via carbon pricing, meaning that: > Who gets away with it depends not on real costs but on politics.
- BurningFrog 5y ago
  I think DF will acknowledge most of those points, but also point out that current non market political systems don't handle them well either. IOW, these problems may not have a great real world solution...
- jokethrowaway 5y ago
  It is definitely a hard problem; we're not solving it at all in the current system. Look at how big oil colluded with the government and pushed for plastic we can't really recycle. If we can measure it and trace it back to polluting companies, everyone should be able to pool their collective power, via their dispute resolution agencies, and demand a trial, imposing fines, limits and what not. It's not going to be easy, but it won't be harder than it is now: corruption should be harder with competing dispute resolution agencies and customers can actually walk away and stop paying them if they don't act in their interest.

dantheman 5y ago

Except that's not what happens in reality - the environment is a luxury good. It is taken care of best in capitalist/free market environments.