Efficiency

I spent the better part of last week lying sick in a Marriott room in Washington, D.C. While there, I had the opportunity to watch a lot of news cable and read the complimentary reading material (save the morning that some fellow traveler stole my morning paper). The Newsweek issue that was in my room included an article by Fareed Zakaria that noted (discussing the current economic crisis):

This crisis should put an end to false debates about government versus markets. Governments create markets, and markets can exist only with regulation. If you want to be truly free of regulation, try Haiti or Somalia. The real trick is to craft good regulations that allow markets to work well.

Pundits can argue about the theory of what is a free market and what steps lead us to the slippery-slope of socialism, but the fact is, this “freer-is-better” model has done tremendous damage to the economy, both domestically and internationally (see Fukyyama’s article for more discussion on this damage).

The economist’s goal, and the goal of the market creators, is not a test of how free or constrained is a market, but rather, how efficient. It is disturbing for moral judgments to come into play about market freedom without the discussion of efficiency in that debate.

For example, something as dull as trademark laws allow brands to flourish and brands should be allowed to flourish because they eliminate waste and empower consumers. This is the moral high ground. Trademark laws, sanitary regulations, and safety requirements are not actually tools of a free market. In fact, a totally free market says that the providers of goods will self-govern and therefore those needed requirements will materialize without government coercion because consumers will demand it. But such a position creates such a burden on the consumer that the waste and pain in creating an efficient solution is destructive.

Sure, we could let this market work it’s way out of this mess as we did in 1929. It would eventually happen and therefore we could justify the pedantic expositions concerning free systems and the power of the masses. And in the course to this achieving justification, we would lay waste with thousands of ruin lives and devastated souls as its consequence.

Which course at that point is the morally just?

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