Saturday, May 19, 2012

Would we expect dualism in market judgements

Following links on Unlearningecon's blog, I came across the blog "anti-mankiw", which (despite my generally pro-Mankiw stance) has some good material on it. This post, which criticized the "markets in everything" mentality, was particularly interesting:

"A few years ago, in a conversation one of us had with a fellow graduate student, the issue came to surface of how to approach certain issues that have become a mainstay of the mainstream curriculum over time. We were specifically discussing the issue of how easy it is to fall into the so-called "markets in everything" trap -- whereby you start thinking about how markets for everything from organs to healthcare could solve most of the problems of social inefficiency. But the issue is much more general than that, and exposing that generality is the topic of this post.

So when one of us was discussing how to approach the "markets in everything" issue, which is really quite widespread among the blogosphere... our friend made the point that, why not start from the other direction, and work your way back? Instead of beginning with the idea that everything should be marketized, begin from the idea and theory that nothing should be marketized, and then ask what would qualify something to be marketized. That is to say, we should expose students' inherent repugnant feelings about a market for body parts or healthcare from the start, and then work backward from there, adding in markets as a qualification of the general argument that commodification should not exist. (In fact, if you think historically, this is actually the way in which the debate occurred -- we didn't start out with a fully marketized society and we only got there from peeling off various layers of social-institutional control!)

I think there's probably something worthwhile in this approach. My question is, would we expect dualism in this answer? Would we expect to come up with the same answer from the other direction (and, as the post later suggests, simply have a better appreciation of problems like exploitation), or would we come up with a fundamentally different answer? If we come up with a fundamentally different answer I'd personally like to understand why.

It also just makes you think about what normally qualifies a good to be traded in a market for mainstream economists. Usually people talk about rivalry and excludability (which together give you four different institutional arrangements). I usually don't think this is very helpful. I find you have to also talk about externalities. We got into this with the students in the intermediate micro class this year when we discussed health care and education in particular. Both are rivalrous and excludable (education probably isn't completely rivalrous... but it can get that way quickly with classroom crowding. Certainly on important margins its rivalrous). Both are "private goods" in that sense and are certainly treated like private goods in a lot of societies. But the public sector plays a big role in each. Why? You need to bring in externalities and concerns about equity too.

Equity - as I've stated many times on here before - really is an externality issue at its heart anyway. The poor kid in the inner city had unequal chances than the middle class kid in the suburb because they are third parties being influenced (coerced?) by the decisions of others. This was Jefferson and Paine's point when they argued for egalitarian liberalism.

Are these the issues that would come up if we solved the puzzle from the other direction? I'm not sure. The discussion on the anti-mankw blog is a little vague about how this would proceed. If we just go through and look for rivalrous, excludable goods with internalized costs and benefits we ought to get the same result, but I'm not sure that's what he has in mind.


  1. Stil Trying To Figure This Stuff OutMay 19, 2012 at 3:33 PM

    What are the externalities in health care and education, please, and what is the intervention they demand?

  2. Been Trying For a While, Darn ItMay 19, 2012 at 4:09 PM

    To elaborate, no one seems to agree on exactly what the relevant externalities are. Education, for example, apparently produces externalities related to productivity, crime, or public decision-making, depending on who you ask.


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