Thursday, September 25, 2008

American Political Economy

Watching the President last night trying to explain the financial markets miasma I tried to figure out how it fits into my understanding of political philosophy. So this is just me, but my own framework for understanding American political economy goes like this:
  • If you believe market failures happen on at least a semi-regular basis, you are probably a liberal.
  • If you believe market failures happen, but are extremely rare and isolated, you are probably a conservative.
  • If you believe 'market failure' is a an oxymoron, you are probably libertarian.
  • If you think markets are always failures, you are probably a communist.

How that all fits into the political machinations of late is hard to figure. and is it just me, but was that the most pessimistic presidential address since Jimmy Carter's energy address in 1977.


Anonymous Anonymous said...

Could it also be that our definitions of words like "the market" and "the economy" help classify us? I mean, I hear all these Congresspeople and bankers saying "the economy could fail." What does that mean?

For many people, I suppose "the economy" has already failed. Why should someone who has already lost his house be worried about the finances of the institution responsible for his NINJA loan?

I have a growing feeling that "the economy" is being thrown around way too much without ever actually being explained. And that most of the people who say "the economy" actually mean "the economic health of financiers." Not that I have anything against their economic health; I just have something against personally contributing to their economic health when I did nothing to harm it.

Thursday, September 25, 2008 10:38:00 AM  
Blogger C. Briem said...

True... but there is nothing new in the fact that congress deals with things superficially. When I worked on capital hill, if you wrote a report you had the report itself, the executive summary and then the super short senator-summary. The single paragraph explanation of what is going on in financial markets is worse than no explanation at all.

Thursday, September 25, 2008 5:28:00 PM  
Blogger EdHeath said...

Define market failure. Do you mean the classic condition of imperfect competition due to one entity (or entities) market power or externalities or market conditions which become imperfect due to imperfect information or other drags on free, open trade?

I think technically a widespread set of bank and/or investment house failures is not a problem for the free market, but it does become a huge, huge social problem. We tend to think the government has failed us if we see people starving on the street.

Meanwhile, I have always understood pollution to fit into the technical definition of market failure, so I think the market is always failing to address that issue on its own. Another reason I can't vote for McCain.

Thursday, September 25, 2008 10:33:00 PM  
Blogger C. Briem said...

I don't think I could do justice to a discussion of the first fundamental theorem of welfare economics which would be the best answer to some of those questions... But I think the simplest criteria for a market that isn't failing is that it should produce an efficient equilibrium. Without debating the meaning of efficiency, I think we can all agree there isn't much equilibrium these days.

Friday, September 26, 2008 8:32:00 AM  

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