Friday, December 17, 2010

Evan fighting the good fight...

...for small independent book-sellers.

I think as economists we get too caught up in our own logic sometimes. Markets optimize... what exactly? Well they optimize the allocation of scarce resources by using privately held, subjective information on the relative value placed on those resources.

As a social institution, the power of the market to optimize in this way is deeply impressive and important to human progress. But the resources that are allocated are the building blocks of other cultural institutions, and so "efficient" allocation has important cultural consequences. Its eminently reasonable and rational to act on the basis of those cultural consequences, even if you embrace market efficiency as an important social good.

Before reacting negatively to these sorts of appeals against dominant market players, I think its important to keep these competing concerns in mind and remember that we are embedded in a social fabric that is considerably broader than the allocative efficiency concerns that economists normally think about (and which, even if we restrict our attention to allocative efficiency, aren't always best solved with markets).

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