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> Democracy is just better at resource allocation. It’s not democracy that’s better at resource allocation, it’s the free market. Authoritarian regimes can se

> Democracy is just better at resource allocation. It’s not democracy that’s better at resource allocation, it’s the free market. Authoritarian regimes can seldom allow the free market to operate, because if they do it accumulates too much wealth / economic power outside the authoritarian’s control. But there are examples of non-democracies with free market economies, e.g. Hong Kong under British rule.

room271 4y ago
I wonder if the two are not quite as separate as you suggest? Can the market be free without some kind of functioning democracy? Without democracy the market as you say is very unlikely to be free. Even with imperfect democracy we still see market failures due to monopoly power, externalities, and corruption.
- bjornsing 4y ago
  True. In practice they go hand in hand (except in very few cases, like Hong Kong under British rule). But I think the distinction is still important. For example I think there’s a good case for limiting democratically elected politicians influence over the economy, by enshrining private property rights and the independence of the central bank in the constitution (as e.g. Sweden has). How would you come to that conclusion if you think it’s democracy itself that allocates resources efficiently?
  - parminya 4y ago
    Democracy creates buy-in and legitimacy, and requires good ideas to be sold to the people rather than imposed on them. There is additional evidence that compulsory voting adds to this legitimacy (in ways that may be freedom-harming, if that matters to you - in particular, some people find evidence that Australia can typically impose stricter rules than other democracies because of compulsory voting). Some of this might go against the American tradition of democracy (which exists to help entrench freedom) but it is compatible with the Australian-British tradition of democracy (which is the goal in itself). Democracy acts as a circuit-breaker for entrenched inefficient resource allocation. For instance, if there was no usable legislative process, but only an executive and a precedent-based judicial system, markets would generally be free, but this would allow the intergenerational accumulation of capital/wealth until some people have almost total power, and some people are essentially serfs. But in democracy, the mere potential for the mass of people to vote themselves wealth limits the incentives to aggressively accumulate capital/wealth. For instance, if the rich want their property rights to be respected, they need to make sure that the mass of the country has enough property to also want protection. And if that potential doesn't work, it can actually be used and new taxes and rules can be introduced that distribute wealth more efficiently. As you can see, some might not agree with your conclusion that "there's a good case for limiting democratically elected politicians['] influence over the economy, by enshrining private property rights and the independence of the central bank in the constitution". By asking the question you did, you first presumed that democracy was inefficient and on that basis drew a conclusion, but then asked how a person who thought democracy improves efficiency would argue for the conclusion whose premises they disagree with.
  - room271 4y ago
    Democracy is not simply representatives voting on your behalf; it includes protection of individual rights (including, to some degree, property rights) and also active civil society. But in any case, I wonder if your example is not so strong - after all, the independent CB was only enabled by democractically-elected representatives voting for it.
the_other 4y ago
> It’s not democracy that’s better at resource allocation, it’s the free market. There is no "free market". Most (probably all) markets, particularly at national and international level are heavily regulated. Subsidies, levees, trade agreements, tax breaks... all of those are counter-freedom in the market, and also rely on good governance to perform well.
- cloutchaser 4y ago
  It's a scale obviously, and usually the more free markets are, and the less the tax take is, the more successful countries tend to be. Even with authoritarian leaders. Singapore being a good example. It's just that authoritarian leaders rarely tolerate free markets.
  - bigfudge 4y ago
    Is that actually true? Germany and scandi countries seem like major outliers. I’d guess that corruption and presence of good institutions are as important as tax % but would be interested in data either way.
    - cloutchaser 4y ago
      They outsource their innovation to freer countries. Germany is basically an industrial powerhouse but they are optimizing things, not innovating. Without the US the standard of living would be much lower for these countries and the rest of the world. No smartphones for a start.
      - bigfudge 4y ago
        I think that’s hard to know. Nobody is ‘inventing’ smartphones except US, but there are substantial barriers to entry for non US manufacturers… language if nothing else. Also there is a massive network effect benefit by being just-first. My hunch is that if the US didn’t exist someone else would be doing this.
- bjornsing 4y ago
mjevans 4y ago
A fair and _competitive_ market is probably best, yet the constraints of both fair and competitive matter. For example, it should be possible for a new entrant to compete in a market; but among other issues can fail with network effects (things tend to be cheaper in bulk), vendor lock-in (either literal or inertia), or credibility / quality concerns. Competition can also be regulated out of a market with barriers to entry or a lack of (space for) alternatives. Regulations related to what type of housing can be built in an area, areas to build housing, transit options, etc. An open, transparent, regulation and management of a market should strive to provide the best results for the people, and very clear to follow guidance about the needs of the people that can be fulfilled by offering more or better services. Resources those services utilize should also have clear and easy to comply with regulations. As an example; a location rated for use as a given type of building shouldn't need a complicated environmental impact assessment, rather the proposed use and construction methods should be compared to an already allowed impact with a pass / remediation / fail criteria.
mvc 4y ago
Do people still think the free market is so great at allocating scarce resources given the lived experience of the last few years? Seems to me that market participants at many different levels needed a fair bit of help with their reaction to events recently. For example... - vaccine designers were allocated additional resources to accelarate testing their designs - in many countries, employers were allocated funds to retain employees to do nothing long enough to weather a period of reduced production - currently in both US and Europe, the "free-market" price of energy is held down by a variety of centrally controlled measures It's not like these measures are taken by "lefty" governments either. Taking the example of the UK because that's where I live, the last two cabinets have been full of the authors of Britainnia Unchained, a document that argues Britain needs to adopt a "far-reaching form of free market economics". The questions I have lately (as an Economics graduate myself) are.... Would things would have turned out better if only those in power had held their nerve and let the market do it's thing? (e.g. allow vaccine development to continue unassisted by government grants, massive unemployment as people voluntarily changed behavior in response to the pandemic, energy bills that rise from taking up 1/12th to 1/3rd of a family's disposable income). Or are that the events of the last few years are so unprecedented that they merited a market intervention whereas for "normal" events, the market will respond better than centrally planned decisions. Will the next few years be full of unprecedented events? Or will we be back to "normal" if/when the war in Ukraine is over. Is the free-market allocating enough resources to solving the problem of climate change?
- thegrimmest 4y ago
  I don't know, if you look at places like Florida that did basically nothing in response to COVID, they seem to have come out quite well actually. It's the places that exercised a lot of central control in redistributing resources that seem to have come out poorly.
- ZeroGravitas 4y ago
  There has been a free market solution to climate change available for decades. It could be argued that where it has been used, it has been the most effective. Yet most people that present themselves as "free marketeers" have ignored the economics consensus and the science consensus. They're basically just paid by rich and powerful people to say or do anything that benefits rich and powerful people. This has always been true since the days of royalty. And it's true today when fossil fuels and corporate monopolies make you rich and powerful. Their alledged support for free markets is just as much a lie as everything else they say. Sometimes they'll accidentally end up on the correct side of issues but its easy to see the pattern isn't "doing what economists say is most efficient". Look at how they desecrate the good name of Adam Smith for example.

room271 4y ago

I wonder if the two are not quite as separate as you suggest? Can the market be free without some kind of functioning democracy? Without democracy the market as you say is very unlikely to be free. Even with imperfect democracy we still see market failures due to monopoly power, externalities, and corruption.

bjornsing 4y ago
True. In practice they go hand in hand (except in very few cases, like Hong Kong under British rule). But I think the distinction is still important. For example I think there’s a good case for limiting democratically elected politicians influence over the economy, by enshrining private property rights and the independence of the central bank in the constitution (as e.g. Sweden has). How would you come to that conclusion if you think it’s democracy itself that allocates resources efficiently?
- parminya 4y ago
  Democracy creates buy-in and legitimacy, and requires good ideas to be sold to the people rather than imposed on them. There is additional evidence that compulsory voting adds to this legitimacy (in ways that may be freedom-harming, if that matters to you - in particular, some people find evidence that Australia can typically impose stricter rules than other democracies because of compulsory voting). Some of this might go against the American tradition of democracy (which exists to help entrench freedom) but it is compatible with the Australian-British tradition of democracy (which is the goal in itself). Democracy acts as a circuit-breaker for entrenched inefficient resource allocation. For instance, if there was no usable legislative process, but only an executive and a precedent-based judicial system, markets would generally be free, but this would allow the intergenerational accumulation of capital/wealth until some people have almost total power, and some people are essentially serfs. But in democracy, the mere potential for the mass of people to vote themselves wealth limits the incentives to aggressively accumulate capital/wealth. For instance, if the rich want their property rights to be respected, they need to make sure that the mass of the country has enough property to also want protection. And if that potential doesn't work, it can actually be used and new taxes and rules can be introduced that distribute wealth more efficiently. As you can see, some might not agree with your conclusion that "there's a good case for limiting democratically elected politicians['] influence over the economy, by enshrining private property rights and the independence of the central bank in the constitution". By asking the question you did, you first presumed that democracy was inefficient and on that basis drew a conclusion, but then asked how a person who thought democracy improves efficiency would argue for the conclusion whose premises they disagree with.
- room271 4y ago
  Democracy is not simply representatives voting on your behalf; it includes protection of individual rights (including, to some degree, property rights) and also active civil society. But in any case, I wonder if your example is not so strong - after all, the independent CB was only enabled by democractically-elected representatives voting for it.

the_other 4y ago

> It’s not democracy that’s better at resource allocation, it’s the free market. There is no "free market". Most (probably all) markets, particularly at national and international level are heavily regulated. Subsidies, levees, trade agreements, tax breaks... all of those are counter-freedom in the market, and also rely on good governance to perform well.

cloutchaser 4y ago
It's a scale obviously, and usually the more free markets are, and the less the tax take is, the more successful countries tend to be. Even with authoritarian leaders. Singapore being a good example. It's just that authoritarian leaders rarely tolerate free markets.
- bigfudge 4y ago
  Is that actually true? Germany and scandi countries seem like major outliers. I’d guess that corruption and presence of good institutions are as important as tax % but would be interested in data either way.
  - cloutchaser 4y ago
    They outsource their innovation to freer countries. Germany is basically an industrial powerhouse but they are optimizing things, not innovating. Without the US the standard of living would be much lower for these countries and the rest of the world. No smartphones for a start.
    - bigfudge 4y ago
      I think that’s hard to know. Nobody is ‘inventing’ smartphones except US, but there are substantial barriers to entry for non US manufacturers… language if nothing else. Also there is a massive network effect benefit by being just-first. My hunch is that if the US didn’t exist someone else would be doing this.
bjornsing 4y ago

mjevans 4y ago

A fair and _competitive_ market is probably best, yet the constraints of both fair and competitive matter. For example, it should be possible for a new entrant to compete in a market; but among other issues can fail with network effects (things tend to be cheaper in bulk), vendor lock-in (either literal or inertia), or credibility / quality concerns. Competition can also be regulated out of a market with barriers to entry or a lack of (space for) alternatives. Regulations related to what type of housing can be built in an area, areas to build housing, transit options, etc. An open, transparent, regulation and management of a market should strive to provide the best results for the people, and very clear to follow guidance about the needs of the people that can be fulfilled by offering more or better services. Resources those services utilize should also have clear and easy to comply with regulations. As an example; a location rated for use as a given type of building shouldn't need a complicated environmental impact assessment, rather the proposed use and construction methods should be compared to an already allowed impact with a pass / remediation / fail criteria.

mvc 4y ago

Do people still think the free market is so great at allocating scarce resources given the lived experience of the last few years? Seems to me that market participants at many different levels needed a fair bit of help with their reaction to events recently. For example... - vaccine designers were allocated additional resources to accelarate testing their designs - in many countries, employers were allocated funds to retain employees to do nothing long enough to weather a period of reduced production - currently in both US and Europe, the "free-market" price of energy is held down by a variety of centrally controlled measures It's not like these measures are taken by "lefty" governments either. Taking the example of the UK because that's where I live, the last two cabinets have been full of the authors of Britainnia Unchained, a document that argues Britain needs to adopt a "far-reaching form of free market economics". The questions I have lately (as an Economics graduate myself) are.... Would things would have turned out better if only those in power had held their nerve and let the market do it's thing? (e.g. allow vaccine development to continue unassisted by government grants, massive unemployment as people voluntarily changed behavior in response to the pandemic, energy bills that rise from taking up 1/12th to 1/3rd of a family's disposable income). Or are that the events of the last few years are so unprecedented that they merited a market intervention whereas for "normal" events, the market will respond better than centrally planned decisions. Will the next few years be full of unprecedented events? Or will we be back to "normal" if/when the war in Ukraine is over. Is the free-market allocating enough resources to solving the problem of climate change?

thegrimmest 4y ago
I don't know, if you look at places like Florida that did basically nothing in response to COVID, they seem to have come out quite well actually. It's the places that exercised a lot of central control in redistributing resources that seem to have come out poorly.
ZeroGravitas 4y ago
There has been a free market solution to climate change available for decades. It could be argued that where it has been used, it has been the most effective. Yet most people that present themselves as "free marketeers" have ignored the economics consensus and the science consensus. They're basically just paid by rich and powerful people to say or do anything that benefits rich and powerful people. This has always been true since the days of royalty. And it's true today when fossil fuels and corporate monopolies make you rich and powerful. Their alledged support for free markets is just as much a lie as everything else they say. Sometimes they'll accidentally end up on the correct side of issues but its easy to see the pattern isn't "doing what economists say is most efficient". Look at how they desecrate the good name of Adam Smith for example.