Wednesday, September 20, 2006

Bad Language rants and Electric Guitars

What paradigm is conjured by "Market Distortion"? To me, it’s that the market is a well-defined system and that government intervention can “distort” it or throws it out of its natural balance. This doesn’t seem quite right to me. Government intervention can certain do harm, but government intervention creates the market in the first place.

And now that I’m complaining, I should take a pot-shot at the whole idea of “the market” as well. There’s no single well-defined set of rights or laws which answers to “the free market” in practice or even in theory. Markets should be understood as a mechanism which produces certain results according to supply and demand, not as a particular set of laws and rights.

I’m sure everyone understands on a technical level that capitalist markets are all legal-political constructs, but I think many people don’t appreciate how transitory and variable those rules are – indeed – have to be. Fifty years ago conservatives argued that government lead Keynesian policies would distort the natural order of “the market”. One hundred years earlier they said the same about anti-trust and anti-child-labor laws. One hundred years before that nobody would have contemplated something like the Federal Reserve Board. All those things are now accepted parts of “the market”. Indeed, most economists would argue that they are necessary to maintaining efficient markets at all.

So now you can probably guess why I don’t like the term “Market distortion”. If a political policy results in poor outcomes, then the problem is poor outcomes, not that the law has disturbed the market from some kind of platonic ideal.

Plus it’s bad framing. The only place where distortion is considered a good thing is in the world of electric guitars.


Bret said...

There's a lot to disagree with here, Tom. I would begin by making a distinction between free markets, and capitalism. A free market is simply a state of commercial anarchy: anyone can trade anything that they can deliver with anyone. I don't think that this is an artificial state at all. It is the default state, and one which governments have come to massive grief attempting to harness and control.

"Capitalism" today connotes a pastiche of enactments designed to prevent the free market's worst excesses and atrocities: slavery, child labor, fraud, monopoly, other forms of market concentration, and the general application or intimation of non-state force to commercial transactions.

The complaint I'd lodge about "capitalism" is that the rules designed to prevent these problems just as often turn out to encourage them, and cause waste and frustration in the process.

I would conclude by saying that "Market Distortion" is a very real thing, and sure, child labor laws cause market distortion: they prevent minors from working who might otherwise choose to work. Just because I call that distortive doesn't mean I'm criticizing it.

Also, Megadeth rules.

Tommaso Sciortino said...

We discussed this in person but I do want to sum up. I think we're basically in agreement so long as we're clear that a "free market" isn't anything we would aspire to, and indeed would lead to far lower productivity and saftey etc.

I think that, having clarified our definition, I still oppose "distort" becuase it makes it sounds like somthing bad is happening when in reality "distorting" the free market is neccessary to preserve efficiency, productivity, and the economic health of a nation.

Tommaso Sciortino said...

I am not familiar with the works of megadeath but I will trust that they do indeed rock.

Bret said...

I suppose, after one beer and some contemplation, that it all comes down to whether you value freedom or efficiency, and to what degree.

Tommaso Sciortino said...

"it all comes down to whether you value freedom or efficiency"

I don't follow.

Let's say you value freedom way more than efficiency. Well then, I expect you would loath a real free market. The way you described it, an individual would provide their own defense, their own security, spend their money on a smaller selection of more expensive goods etc. etc. Basically they'd spend their time cowering under their beds cleaning their guns. That doesn't sound like freedom to me. That sounds like a society in which people have a very narrow range of unpalatable options to choose from.

Now, I suppose if you thought of freedom as just "freedom from government intervention" you'd have a point. But then, that's not a very good way of defining freedom.

Bret said...

I don't mean freedom in the sense of "freedom to choose an action with little or no encumbrance of any kind" (this is a utopia that can't be brought about purposefully or permanently); I mean it in the classic sense: freedom to choose an action without encumbrance by any statutory power.

I would still maintain that my description is essentially accurate, with the caveat that those first few steps you take away from any system that is 100% one or the other are extremely valuable to the average individual.

Me personally, I don't value freedom to the point where I'd relish providing for my own security, or building my own freeways. I also don't value efficiency to the point where I'd like my job to be determined by central planning board, etcetera.

But the range still exists.

Tommaso Sciortino said...

"freedom to choose an action without encumbrance by any statutory power"

How does this work exactly? I mean, let's say I go to a country whose government has been decapitated and where no "statutory power" exists to encumber me. Ok, maybe you consider that freedom. But let's say that I get stranded in the desert and the locals say they won't teach me how to get water unlessI work in a diamond mine for life. Wouldn't you say I have become less free even though no "statutory" power has been deployed against me? Aren't there non-governmental foes to freedom or do those not count?

Am I understanding this correctly? I'm taking "statutory" to mean "power of the state".

Bret said...

Yes that's exactly what I mean. In your counter-example, the locals are attempting to enslave you, which they may do, as there apparently isn't even enough local government to secure your basic physical liberty. In the sense I've been using in this thread, I would call this freedom: no government is going to save you, but if you suddenly acquire a gun and lots of bullets, no government is going to save your captors either, or penalize you for doing whatever you decide is necessary.

(Note that this is terribly inefficient)

I'm certainly not saying I'd like this situation, but I do believe that it represents an extreme possible point in the range. Note that, at this hypothetical point, complex economic activity is virtually impossible, yet individualism and competition take their most pronounced and dramatic forms.

Tommaso Sciortino said...

Ok, I understand now. I just think that youre definition of "freedom" both doesn't really match up with the way people use it and isn't terribly conducive to clear thought. Let's discuss next time we meet in the real world.

Bret said...

We do always settle these things faster in person.. just so I know, what words would you use trying to describe the range that we're discussing? I'd call the extreme ends 'freedom' and 'efficiency'.

Tommaso Sciortino said...

I’m reworking this reply from the original I posted this morning.

It seems that you define freedom such that the only entity capable of restricting it is government. Everything else falls under “efficiency”. And as you explained, different people value freedom and efficiency differently. Ok then. Let’s think about that.

Let’s take an example from popular culture. In the movie “V is for Vendetta” Evey is captured by government agents and interrogated in a cell for weeks and weeks. Obviously we understand that her freedom has been reduced. Later, we find out that she’s not being held by the government at all but rather the decidedly non-governmental V. If I understand you correctly the Heiligian analysis is: “Our previous understanding of the situation is wrong. Before we thought Evey’s freedom was being restricted. Now we know better. Now we know that Evey is just as free as she was before her capture. However, her efficiency has been forced down by V’s machinations.”

Ok. So far the Heiligian analysis works just fine. Sure it’s seems a little weird that Evey’s not capable of telling the difference between freedom and lowered efficiency but let’s put that aside for one second. Both situations are bad, but for different reasons. What’s weird to me is that – all things being equal –it’s not immediately clear if Evey should prefer one situation over the other. I mean, I think the two situations are essentially interchangeable. It doesn’t matter who’s locking her up against her will. Both situations are equally bad.


I think we’ve already established that you value freedom over efficiency more than I do. So shouldn’t you have a strong preference for the second scenario? If not, why not? If everyone thinks both situations are essentially interchangeable, doesn’t that mean that almost everyone values freedom and efficiency about the same?

(Again, this is taking all things being equal. Obviously your chances of escaping from some mad-man’s house are greater than escaping from a government prison, but let’s assume that away for now.)

For me freedom means having a wide range of meaningful options. My freedom doesn't oppose or coincide with efficiency. In this context it isn’t well defined since everyone is going to measure efficiency differently. When I say freedom I mean it in terms of the power to act or speak or think without externally imposed restraints, unrestricted, unconfined or unfettered. The right, or the capacity, of self-determination, as an expression of the individual will.

To me it’s obvious that Evey’s situation is unchanged. Clearly it does not matter if she’s being locked up by the government, a terrorist, a mudslide, or a blackmailer. In all situations she finds herself with the same single unpalatable option which means her freedom is reduced equally.