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Thursday, February 01, 2007

ACS v. FedSoc: Markets or Management

The appropriate role of markets and judicial management is the second in our series of core issues we hope to encourage FedSoc and ACS members to discuss.

One of the most important conservative thinkers, and often one of the most overlooked, Friedrich von Hayek wrote about the problems of central planning and central management of markets. The problem is essentially the lack of a price signal to indicate how resources ought to be efficiently distributed in a society. It is very easy for an ivory tower intellectual to assert that everyone ought to have access to health care providers, regardless of their ability to pay for them. It is a very different thing to impose a cost-structure on these providers. The inevitable results are either an across-the-board drop in quality or a decrease in the supply of doctors available at the publicly assigned price (see Canada and other socialist medical states). The arrogance of most political actors to assume that it can provide more of some social good by lowering its price is entirely antithetical to the basic tenets of economics.

Rob's position (I won't impute it to all of ACS for the group's sake) is that the market does not always act as it should because the conditions necessary for a free market to work do not usually exist. It is the most banal of platitudes to say that economists make all these unrealistic assumptions about the way the world works. However, such assumptions do not undermine the validity of the statement that people will provide more of a product when the market price for it is higher. After all, that is the reason why many of us are attending Columbia Law School in the first place.

As far as the existence of externalities goes, the market is admittedly ill-equipped to deal with problems of collective action; this was one of the purposes behind the creation of the federal government as it was originally conceived. The problem is usually not whether or not there needs to be an intervention; rather, the question is how a government intervenes (which is where ACS and FedSoc members are likely to diverge). Often, a government's economic intervention is fraught with traditional problems assailing democratic government: the pursuance of private interests over the public good. Short political horizons and limited terms of service make it easy for a politician to prefer quick-fixes to fundamental solutions (which require temporary sacrifice). Not to mention, the lack of a profit motive in government agencies is likely to promote inefficient (if not outright corrupt) operation of government institutions. Conversely, providing the market with as much information as to the true costs of a good would promote an efficient distribution of resources, taking social costs into account.


To check out what the people at ACS have to say about this issue, please click here.

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