Some Thoughts on “The Market”

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Posts have been few and far between lately because I’m writing my masters thesis. It is all-consuming. But as I work, not everything that I write down can go in the final paper. Like this bit of editorializing… So I thought I would share it here. Your thoughts?

Market Failures and Externalities, Civil Society, and the State

To speak of market failures and externalities is to speak from an incorrect premise on the nature of ‘the market.’ This premise, which assumes that ‘the market’ will always lead to the best social outcome, denies the human element in this decentralized system. Perhaps because it is decentralized, and in theory not directed by any one corruptible or fallible individual (or small group), we do not see it as susceptible to the same human qualities that we control for in government or even in corporate management. However, the market in actuality is the sum of our economic activity. We, humans, are the market. We do not all bring only our best behavior to the market; in fact, whether because of social conditioning or human nature, we may bring only our self-interested behavior to the market, as Adam Smith has told us to. And so the market is human: just as people are capable of peace and violence, benevolence and evil, self-interest and altruism, thus is the market. To speak of ‘market failure’ is to imply that ‘the market,’ when operating properly, is only beneficial to society. And indeed, whenever something is not priced and therefore included in the market, leading to a ‘market failure,’ we call it an ‘externality.’ If only we could price something like the life of a worker or a thriving rainforest, and situate it within the market, there would be no further failure. But if humans are capable of taking each others’ lives outside of the market, why would we refrain from doing so inside the market?

In reality, the concept of ‘the market,’ similar to the concept of ‘civil society,’ merely provides an analytical category for study and policy making. Where these three analytical categories exist – i.e., in societies in which we find private commerce, state activity, and non-state, non-profit activity – citizens actually participate in all of them. Imagine the bureaucrat who grocery shops and coaches their child’s soccer game, or the business owner who votes and attends church. And so each of these seemingly separate systems are susceptible to human shortcoming. However, typical modern Western (and most especially neoliberal) thought allows such critique of civil society and the state but not of the market. We use democratic processes to dialogue with one another on governance, and implement checks and balances to limit the corruptibility of government officials. In turn, this provides similar checks for civil society by way of tax laws, political endorsement limits, etc. And yet, common rhetoric, even from more ‘left’ market economists, implies that we should actually remove checks and balances from the market because of its infallible mechanisms. It is entirely true that certain regulations on market activity do more harm than good, and this is why we debate them – through the democratic process and the activism of civil society. But this is not uniformly the case, and it is not because freer market activity is always ‘better’ (in terms of social outcomes). It is because in all three categories of social activity we must maintain a constant process of evaluation and reform in order move then entire society toward greater peace and justice.

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