Which gets it right most often, markets or government?

Question

It's sad that I even have to ask, but I'll do it anyway.

Only a dead end socialist could call this question oversimplified.

crabby... please don't insult Dr. Friedman's memory by suggesting anything other than he wanted government out of the way of efficient markets. You bring up the roads...excellent example. Government solves only those problems that can be solved only by the collective. Clearly it would be impossible for a private company to negotiate with landowners, get the permits, etc. on any kind of scale sufficient to create the necessary roads. So the collective steps in.

Friedman was an absolute genius, by the way. Handed Keynesians their azzes on a platter.

ken, go back to the collective and plant some sprouts and sing. You're hopeless.

Answer 1

Markets, no question. I think you even might be looking at it the wrong way about the roads. A private company could have put in twice as many roads for the same price, in areas that needed roads, not in government selected areas. Look at the railroad companies, they're a good example of large-scale transportation in areas that needed it.

Even the environment could benefit from private ownership. All the forests in Sweden are privatized and the owners have a motivation to keep up their investment. The government needs to start upholding the constitution by limiting itself to the powers enumerated therein.

Answer 2

Markets - If a product or service is not worth the requested price then people will not buy it. Ths will cause the price to drop untill either the consumers consider it to be worth paying, or it is not cost effective to provide the good or service, in which case it will no longer be offered.

In a free-market, if an entreprenuer sees a need for a good or service he will take the risks to provide it. If the market finds it beneficial to their daily lives they will reward the entreprenuer by purchasing the good. The greater the benefit or enjoyment derived from the good or service the greater the reward that the market will bestow (more people will buy or they will pay a higher price). This is why a heart surgeon is paid more than a dentist. Both provide a benefit to the populace but saving lives is a greater benefit than filling cavities. Accordingly the reward is greater.

If on the other-hand, the market feels that there is no need for a good, then the market will not reward the production of that good. This is why 8-track manufacturers are no longer making money. They were no longer benefiting society, so society gave the rewards to those who were, namely the CD manufacturers.

If the market decides there is a need for a certain charity, then someone will creat it and the market will donate the funds to support it. If there is no need for that charity, or if the populace decides that it is an unworthy cause, then they will not support it and it will fail. This is good because the cause was not needed as it was unjust, unworthy, or there is another organization allready in place that was better able to benefit the populace.

Government - Governments ignore these market forces. All governments (not just in the US) reward those who do not deserve it. When a government funded program is effecient with the funds that the government provides, they get fewer funds the next year. However, if the program runs out of money because of poor money management, the government will increase the funds they recieve the next year. As an auditor of governmental entities (mostly MHMRs and school districts) I've seen it happen countless times.

If a government decides that a service is needed then the populace is forced to pay for it through taxes whether or not you will ever use the service. If the federal government decides that there should be federally funded worm farms for ice fishers in Idaho, even the vegitarians of Miami are required to pay taxes to fund it. If the government decides that everyone over the age of 80 needs free sky diving lessons then no matter how few people in the counrty agree with it, everyone is required to pay pay for that service.

Obviously markets will be right more often.

According to Adam Smith (Founder of Modern Economics, author of Wealth of Nations) Governments should only be involved in enforcing the law, providing the military, and building and runnign light houses as these are the only things he could think of that you can't make a profit from.

Furthermore, I believe it was Benjamin Franklin (may have been Jefferson) who said that "governments should only do those things which we cannot do for ourselves." Any service that can be provided by the private sector should not be provided by governments.

Answer 3

You are setting up a false dichotomy--one that even conservative economists like Friedman rejecct.

Government has an economic policy role--and in that context "gets it right" when, like any economic actor, decisions are made on sound information and reasoning. The same is true of the "market"--although competant economists long ago realized that viewing the "market" as some sort of entity "out there" that operates independantly of human decision-making is simply wrong. Again, Friedman rejected that vview--that's thewhole point of his approach, in fact. And--the "invisible hand" of the market is neither independant of economic actors nor is it invisible.

When markets do in fact operate freely, they work well--but there is also such a thing as a "market failure"--situations in which markets don't respond the way we need them to. For example, despite a century of effort, no one ever found a market-based way to build and maintain a national road system in the US (1800s)--despite the fact that by 1900 it was obvious to everyone that an industrial economy HAD to have such a system. So the job of owning, building, and maintaining highways--and most urban roads--became a government enterprise--and by every definition a socialist one.

I'm not saying that "the government" should be running the economy. The list of government foul-ups is long and well-documented. But its not a question of "the market" or " the government"--its a question of which should be doing what job. When the government is perfrming a job for which its best suited, the results are usually good (our road system is a great example of that). When it tries to fiddle with things better left to the market, it screws up.

But the revers is also true. Example: we've left the energy issue to the market for the last 25 years. What do we have? Historically high dependance on foreign oil, energy costs that are already hurting economic growth, an oil industry that has lost even the pretense of innovation--and populated by firms like Exxon who want government subsidies on top of the profits they're making to "encourage" them to build new refineries.

The bad part? (besides the above!) It is exactly this kind of irresponsible behavior on the part of some firms that usually creates market failures--and provides the incentive for government intervention. Watch in the next few year as this plays out. The oil industry is going to continue to dig in its heels--instead of responding to a changed business climate and parameters with innovation and internal reforms. And the government willl end up stepping in--which is not what should happen. But that s exactly where we're headed.

Answer 4

Markets (with meddling government oversight) seems to be what works best. Governments are not fit to run any economy.

I think we should have stayed on the gold standard, and I don't think we need a Fed Reserve. Our economy is strong, but I think the dollar continues to lose value at a high pace. If these idiots in Washington don't get spending under control we're headed into some big trouble.

Answer 5

Markets.
Capitalism is like a car. There's nothing wrong with cars. It's the drivers. People are imperfect. Some make mistakes and others deliberately harm others.
Communism is no solution since it, too, relies on imperfect people, but under communism, the people have no recourse.

Answer 6

Thats a good one, and look at all of the well reasoned arguments from the socialists, bwahahahahahahaha.

Answer 7

I think you have to have both.

Companies won't police themselves because that cuts into their profits (why pay minimum wage when you could just buy slaves, eh?)

But, government run enterprises do not focus on efficiency or encourage workers to be innovative.

So if you want efficiency and innovation, go to companies; but don't trust them to act in the public good.

I'm not economist, just a corporate prole so I could just be excusing my existance.

Answer 8

If you can point out anything the government has done right, I'll take this question more seriously. I guess that answers the question.

Answer 9

Markets, by a huge margin.

In fact, gov't only should get involved when markets have demonstrated they cannot deal with a problem.

Answer 10

Gets it right in what sense?