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Why do some people believe that the market system is the best mechanism for allocating scarce resources and thereby encouraging a positive investment climate?
Yeeling
(1) Because they have money and using the market system gives more power to those with money so claiming that the market system is best is in their best interests.
The poor who can't afford mosquito nets and so see their families (and the economy) suffer from malaria don't think the market system is best.
(2) Because they are completely blinded by ideology into thinking that all goods are private goods.
The market system doesn't provide for public goods (national defense, law enforcement, roads, etc.) and doesn't provide enough of goods with positive externalities, such as education.
One of the factors that made America great was public education.
http://cshe.berkeley.edu/publications/do…
But U.S. education is no longer the best as the U.S. cuts back while other countries spend more:
http://en.wikipedia.org/wiki/Education_I…
Roads, canals, railroads, etc. are all built with government money. Without an effective transportation infrastructure, no economy can thrive.
http://krugman.blogs.nytimes.com/2010/09…
(3) Because they don't want to admit they like the cleaner air that government pollution controls have given us.
(4) Because they really don't believe what they say.
(A) No one wants their neighbor putting in a garbage dump, building too big a house, etc. and people rely on zoning laws to prevent that sort of thing from happening. Zoning laws a re a major infringement on the market place.
(B) How many people really want to decriminalize narcotics? prostitution? and all the other socially undesirable activities that a free market would allow but that government interference prevents.
etc.
When push comes to shove, just about everyone, including those who claim to believe that the market system is best, end up voting for a mixed system, where some resource allocation is done by the market, but other resource allocation is done by other mechanisms.
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∙ 12y ago
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