{"id":23995,"date":"2017-02-23T10:29:40","date_gmt":"2017-02-23T15:29:40","guid":{"rendered":"http:\/\/ssgreenberg.name\/PoliticsBlog\/?p=23995"},"modified":"2017-02-23T10:30:54","modified_gmt":"2017-02-23T15:30:54","slug":"the-theory-of-competitive-markets-is-unrealistic","status":"publish","type":"post","link":"https:\/\/ssgreenberg.name\/PoliticsBlog\/2017\/02\/23\/the-theory-of-competitive-markets-is-unrealistic\/","title":{"rendered":"Free Markets Only Work When They Are Not Free"},"content":{"rendered":"

William K. Black wrote the article Kenneth Arrow\u2019s (Ignored) Impossibility Theorem<\/a> in New Economic Perspectives<\/em>. The motivating event for the article was the death of economist Kenneth Arrow.<\/p>\n

\nThe author of the obit stressed the impossibility of such systems being optimal. Contrast that emphasis with the author\u2019s treatment of Arrow\u2019s work on \u201cgeneral equilibrium.\u201d<\/p>\n

\nProfessor Arrow proved that their system of equations mathematically cohere: Prices exist that bring all markets into simultaneous equilibrium (whereby every item produced at the equilibrium price would be voluntarily purchased). And market competition puts society\u2019s resources to good use: Competitive markets are efficient, in the language of economists.<\/p>\n

Professor Arrow\u2019s theorems set out the precise conditions under which Adam Smith\u2019s famous conjecture in \u201cThe Wealth of Nations\u201d holds true: that the \u201cinvisible hand\u201d of market competition among self-serving individuals serves society well.\n<\/p><\/blockquote>\n

That is one way to phrase it, but a more accurate, parallel way to phrase Arrow\u2019s work on general equilibrium would be as an \u201cimpossibility theorem.\u201d Arrow actually proved that it was impossible for general equilibrium to occur. The \u201cprecise conditions\u201d in which economists can guarantee that a market transaction \u201cserves society well\u201d is the null set. There is no market that meets those \u201cprecise conditions\u201d because they are impossible to meet.\n<\/p><\/blockquote>\n

This article introduces me to a field of study that I had not known before. I can see that I am going to have to do more reading about this area.<\/p>\n

To further quote from the article, Black’s concludes the followin:<\/p>\n

\nThe ultimate failure of economics as a field is to:<\/p>\n

    \n
  1. worship an economic model that is criminogenic,<\/li>\n
  2. hide that disaster from the public by assuming \u201csilently\u201d an \u201cADM God\u201d that contradicts the model\u2019s express assumption,<\/li>\n
  3. continue to worship and proselytize that model when its silent assumption of an \u201cADM God\u201d repeatedly produces criminogenic policies and epic predictive failures, and<\/li>\n
  4. praise your models as \u201crigorous,\u201d \u201cscientific,\u201d and \u201ctransparent,\u201d and<\/li>\n
  5. define critics as anti-scientific and demand that their critiques be excluded as heresy.<\/li>\n

    \/ol>\n<\/ol>\n<\/blockquote>\n

    In other words, free markets only work when a godlike superior force sets strict rules to guard against criminogenic behavior. Free markets only work when they are not free.<\/p>\n","protected":false},"excerpt":{"rendered":"

    William K. Black wrote the article Kenneth Arrow\u2019s (Ignored) Impossibility Theorem in New Economic Perspectives. The motivating event for the article was the death of economist Kenneth Arrow. The author of the obit stressed the impossibility of such systems being optimal. Contrast that emphasis with the author\u2019s treatment of Arrow\u2019s work on \u201cgeneral equilibrium.\u201d Professor […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[166],"tags":[],"class_list":{"0":"post-23995","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-stevegsposts","7":"czr-hentry"},"_links":{"self":[{"href":"https:\/\/ssgreenberg.name\/PoliticsBlog\/wp-json\/wp\/v2\/posts\/23995","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ssgreenberg.name\/PoliticsBlog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ssgreenberg.name\/PoliticsBlog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ssgreenberg.name\/PoliticsBlog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/ssgreenberg.name\/PoliticsBlog\/wp-json\/wp\/v2\/comments?post=23995"}],"version-history":[{"count":3,"href":"https:\/\/ssgreenberg.name\/PoliticsBlog\/wp-json\/wp\/v2\/posts\/23995\/revisions"}],"predecessor-version":[{"id":23998,"href":"https:\/\/ssgreenberg.name\/PoliticsBlog\/wp-json\/wp\/v2\/posts\/23995\/revisions\/23998"}],"wp:attachment":[{"href":"https:\/\/ssgreenberg.name\/PoliticsBlog\/wp-json\/wp\/v2\/media?parent=23995"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ssgreenberg.name\/PoliticsBlog\/wp-json\/wp\/v2\/categories?post=23995"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ssgreenberg.name\/PoliticsBlog\/wp-json\/wp\/v2\/tags?post=23995"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}