The free market often sounds quite simple and straight forward. Consumers simply decide whether product A or B benefits them more and then choose accordingly. If the same or similar product is sold by shop A or B consumers simply choose whichever is cheaper, better quality or otherwise benefits them. It is easy and doesn’t require any complicated plan or someone telling consumers what is best for them, people simply decide themselves. This is the market as described by economists, politicians and writers, especially when they are trying to make a political point. After all, if the market is so simple and straight forward, why do we need the government interfering? All these rules and regulations only get in the way, surely it is better for everyone if we just leave the consumers to decide for themselves. Continue reading “No One Has Time For A Completely Free Market”
It is common to hear people on the internet complain about the power of the state. It is regularly denounced for forcing people to obey its laws and pay taxes. Libertarians criticise this use of coercion and regularly compare it to a gang of thieves or the mafia. Many advocate that we either abolish or minimise the size of the state and replace it with a world where everything is based on voluntary co-operation and you are free to do what you want so long as it does not harm anyone (known as the Non-Aggression Principle). It seems like a simple choice between peaceful liberty or violent oppression. It is a handy debating trick as it allows libertarians to paint themselves as defenders of freedom while opponents look like tyrants. As nice as it sounds, it suffers from the fatal flaw that the market is just as reliant on the coercion as the state is. Continue reading “Both The State And The Market Are Based On Coercion”
Free marketers view competition as the solution to most if not all problems in the market. If a business is charging too high a price or selling poor quality products then a new business can simply enter the market and take its place. If workers are mistreated or underpaid, then there will be an incentive for competitors to offer better conditions. Competition will cure all problems, prevent excessive profits, exploitative wages, protect the environment, increase your IQ and make you ten years younger (you may think I’m being facetious, but I have yet to come across a problem that libertarians haven’t claimed competition would solve). Continue reading “Why Competition Alone Is Not Enough”
On this blog I often discuss market failures and the need for government action to correct them. It is necessary for regulation to keep the free market from getting too wild. But is government the right answer? Can the market not control itself? Could companies not bind together to create industry standards without government bureaucracy? Can private regulators not ensure proper standards are met without the need for state intervention? Continue reading “The Failure Of Private Auditing”
Milton Friedman is one of the most famous economists that ever lived, yet reading his most famous book, Capitalism And Freedom; it is hard to see why. The book is surprisingly basic and doesn’t offer much of an argument. Friedman merely states things (such as the minimum wage causes unemployment) without offering any supporting evidence. It is as though simply saying it was enough to make it true. There are hardly any references or citations in the book, which makes it very difficult to know if any of what he says is actually true. There is no reference to history or current affairs or if any of his ideas have worked before or if his criticisms reflect reality. Continue reading “Capitalism And Freedom”
The main reasons why Communism failed was that it could not provide a decent standard of living for its people. This was because the absence of a market meant Communism was enormously wasteful with resources. The system was notable for its crippling inefficiencies and gross mismanagement. Despite having some of the highest levels of investment, they had some of the lowest returns. This was due to the absence of market forces and signals, the primacy of political influences and a lack of accountability. Continue reading “Why Did Communism Fail? #2 – Absence Of The Market”
One thing about most discussions of the free market is that they never mention location. It is enough that firms exist; it is presumed that if they offer a good product and a good price consumers will come to them. However, the business world treats this very differently. Great attention is paid to location (there’s even a show named after it) and business people are well aware that a couple of yards can make or break a business. Location changes the way we view competition, instead of focusing on whether or not there is a national monopoly, we should realise that almost all firms are to some extent monopolies in their area. Continue reading “The Importance Of Location”
Advertising is a hugely influential part of society and business yet it is never mentioned in traditional economics. In neo-classical economics, firms do not advertise. This is not a trivial omission because advertising has an enormous effect on the market. Roughly $500 billion dollars was spent on advertising in 2011. Nor is its omission a simple mistake. Rather it is deliberate because once you examine advertising, you see what an enormous distorter of the market it is. Continue reading “Economics Of Advertising”
One of the most glaring omissions from modern economics is the complete absence of any mention of power. Textbooks describe a world where everyone is equal and no one has power to influence others to benefit themselves. Norbert Haring and Niall Douglas make a huge contribution to correcting this omission by discussing the importance of power relations in economics and during the financial crash in their brilliant book, Economists And The Powerful. They show how power got removed from the economics discourse for ideological reasons, the power and influence of the financial industry, the corporate elite, how the economy is best described as monopolistic competition, how the money supply is controlled by banks, how the labour force is shaped by market power and how the government is manipulated by corporate interests for their own gain. It is a superb book that I highly recommend.
I decided to study economics because I wanted to change the world. I wanted to improve people’s lives, particularly the poor and powerless. I wanted to find solutions to the present crisis so that the scourge of mass unemployment no longer haunts us. What I got instead was completely different. My economics textbooks did not deal with important issues like unemployment, recessions and debt. In fact, they barely mentioned them. Instead they are filled with nonsense that has more to do with pushing a free market ideology than describing how the world really works. The Economics Anti-Textbook brilliantly takes apart the mainstream textbooks and their flawed arguments. It clearly and concisely debunks the mainstream myths contained in microeconomics textbooks. It is one of the best economics book I have ever read and essential for any economics student.