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Okay, seems like things are a bit clearer now. I don't think it makes a lot of sense to answer quote-by-quote. At a high level, it seems to me that our disagree

Okay, seems like things are a bit clearer now. I don't think it makes a lot of sense to answer quote-by-quote. At a high level, it seems to me that our disagreement is based on a different understanding of how markets work.[0] Market mechanisms and prices are useful for guiding the long-term structure of production relations in society. In a sense, market mechanisms provide a meta-heuristics-type solution (think genetic algorithms) for problems that are very difficult to solve via other means.[1] Now, two things greatly diminish the usefulness of markets in a natural disaster crisis. First, market mechanisms tend to operate on a very large timescale (when prices rise, it takes months or years for new entrants to the market to appear). Second, the problems created by natural disasters are actually pretty straightforward. You wouldn't use genetic algorithms to solve a minimum spanning tree problem, which is more or less the precise problem you need to solve when re-establishing transportation, for example. On a more meta-note, while markets are obviously extremely useful, I don't think there's a lot of evidence that they work well when there is genuine scarcity for true essentials (such as food, shelter, water). They work well enough to provide those things at a steady rate as long as there are no shortages, but in times of shock (or, actually, if you look at the problem of hunger globally, when there are shortages) they don't seem to work so well (if by work well you mean delivering results that are acceptable to an average person's morality). [0] Naturally, I am arrogant enough to believe that my understanding is more refined ;) [1] Not necessarily because those problems are computationally hard, but because those problems are difficult to model and the input data is difficult to obtain.

pdonis 12y ago
I agree that we have a different understanding of how markets work. To hit what seem to me to be the key points: (1) Markets do not just affect the long term structure of production relations (though they certainly do that). Prices of many goods and services fluctuate on a daily or even hourly basis. That is markets operating in close to "real time" to restructure economic activity in response to all kinds of changes in conditions. (2) Markets do not just change when new entrants appear. There are other actions that market participants can take on shorter timescales to respond to changes in supply or demand. One key one is finding substitutes for goods or services that have become scarce due to some change in conditions. (3) It's true that markets can't solve all problems, and that they work less well when there are non-market constraints operating, such as those imposed by a natural disaster. However, people who support markets (like me) are not claiming that markets can solve all problems; we are claiming only that, in cases where markets don't work well, other solutions (such as central planning) work even worse. (One key reason for this is that most problems of resource allocation meet the conditions of your footnote #1: they are difficult to model and the input data is difficult to obtain. This applies to natural disasters as much as anything else: your apparent belief that such disasters are "straightforward" to handle does not seem to me to be borne out by what actually happens when central planners try to deal with such disasters. Btw, I think these problems are also computationally hard, in addition to the other characteristics you cite; that's another reason why markets, which are essentially distributed computation, work better than central planning, which is basically the Von Neumann architecture with a single-core CPU, with all its well-known bottlenecks.) (4) If your criterion for working well is delivering results that are acceptable to an average person's morality, I don't think any system devised by humans has ever consistently done that in times of crisis. We're all still floundering, from that point of view. Markets are simply the "least worst" of the systems we've discovered so far. Btw, I'd be interested to see your response to the "mixed" (market + non-market) method I proposed, in the post in this subthread that you originally responded to, for dealing with shortages in a crisis such as a natural disaster: some charitable organization (which could be the government, but does not have to be) buys necessities like food and water at the (increased) market price, and then distributes them to those who need them and can't afford them. This would allow the market to work, by giving an incentive to suppliers to increase supply (because prices are higher), but would also provide a mechanism for achieving a fairer outcome, by having the charitable organization act as a market proxy for the indigent. (Of course, it still leaves the charitable organization with the problem of how to fairly distribute its goods, but that problem is going to be there no matter how the goods are obtained.)

pdonis 12y ago

I agree that we have a different understanding of how markets work. To hit what seem to me to be the key points: (1) Markets do not just affect the long term structure of production relations (though they certainly do that). Prices of many goods and services fluctuate on a daily or even hourly basis. That is markets operating in close to "real time" to restructure economic activity in response to all kinds of changes in conditions. (2) Markets do not just change when new entrants appear. There are other actions that market participants can take on shorter timescales to respond to changes in supply or demand. One key one is finding substitutes for goods or services that have become scarce due to some change in conditions. (3) It's true that markets can't solve all problems, and that they work less well when there are non-market constraints operating, such as those imposed by a natural disaster. However, people who support markets (like me) are not claiming that markets can solve all problems; we are claiming only that, in cases where markets don't work well, other solutions (such as central planning) work even worse. (One key reason for this is that most problems of resource allocation meet the conditions of your footnote #1: they are difficult to model and the input data is difficult to obtain. This applies to natural disasters as much as anything else: your apparent belief that such disasters are "straightforward" to handle does not seem to me to be borne out by what actually happens when central planners try to deal with such disasters. Btw, I think these problems are also computationally hard, in addition to the other characteristics you cite; that's another reason why markets, which are essentially distributed computation, work better than central planning, which is basically the Von Neumann architecture with a single-core CPU, with all its well-known bottlenecks.) (4) If your criterion for working well is delivering results that are acceptable to an average person's morality, I don't think any system devised by humans has ever consistently done that in times of crisis. We're all still floundering, from that point of view. Markets are simply the "least worst" of the systems we've discovered so far. Btw, I'd be interested to see your response to the "mixed" (market + non-market) method I proposed, in the post in this subthread that you originally responded to, for dealing with shortages in a crisis such as a natural disaster: some charitable organization (which could be the government, but does not have to be) buys necessities like food and water at the (increased) market price, and then distributes them to those who need them and can't afford them. This would allow the market to work, by giving an incentive to suppliers to increase supply (because prices are higher), but would also provide a mechanism for achieving a fairer outcome, by having the charitable organization act as a market proxy for the indigent. (Of course, it still leaves the charitable organization with the problem of how to fairly distribute its goods, but that problem is going to be there no matter how the goods are obtained.)