Social Consent and the Market Economy

This damn market economy!..

This damn market economy!.. (Photo credit: iwfx)

Jim Manzi, in his book Uncontrolled, argues correctly that a market economy requires wide social consent. He then asks “Why should those who lose out in market competition give it?”

I think the answer is simple: those who “lose out” in a market economy would probably lose out even more in any alternative arrangement.

You might be tempted to dismiss my answer as some kind of simple right wing ideology (as opposed to a simple left wing ideology), but there are reasons behind my answer that I find compelling.

The first is empirical: we have lots of evidence of market economies, limited market economies, and non-market economies. Evidence suggests that the least well off are usually better off in a market economy. Data matters. But, correlation is not causation, so we must not rely too much on history.

The second is logical: economic theory, particularly that based on deductive logic, predicts that the least well off will be better off in a market economy. I can’t reproduce an entire introduction to economics in a single blog post, but with work, you can explore this and convince yourself. Don’t take my word for it!

In short, both logic and evidence say that the least well off fare best in a market economy. Those who prefer alternatives should be given a hearing, but they must bring logic and data, not just emotion.

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One response to this post.

  1. Posted by jimmanzi on May 11, 2012 at 5:12 am

    Thanks for the thoughtful comments.

    I actually discuss this at length in the book. A big problem is that while group X might understand that it is a good idea to have such a system of democratic capitalism to improve overall living standards, that (1) they might not believe this general proposition, even though you and I would think they are wrong, (2) they might care more about other “social” goods, (3) they might be a group that, in fact, be in the minority does lose out under such a system as compared to a more moderated version of it, and.or (4) might believe that even if they are in the majority of net winners under such a system, that they can partially rig the rules of the game to further advantage themselves as a special interest. A realistic political economy needs to recognize that such motivations are real, widespread and highly likely to persist.

    All the best,
    Jim Manzi

    Reply

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