Paul Krugman articulates much better what I tried to say in the earlier post. Check it out here.
In other news, I'm done with exams and enjoying the brilliant city of Bangalore for a couple of months.
A certain somebody recently accused me of being a "neo-liberal fascist" on account of my endorsment of free markets. This accusation wasn't entirely baseless. When you break it down, all my arguments require well-functioning markets. Something which, I was made to understand, can't be taken for granted. Although markets evolve into well-funtioning one over time, the collateral damage in terms of poverty and economic hardship requires one to think of stop-gap measures.
So I thought I'd do some reading. I picked up 'Capitalism and Freedom' by Milton Friedman and what I've read so far is the best articulation of the capitalist ideology I've ever seen. Check it out here if you have the time.
P.S: recommendations for things to check out in Bangalore are very welcome :)
8 comments:
Most critics of capitalism (nowadays) tend to be non-economists. Someone told me that free market capitalism is almost impossible to argue against from an economic perspective.
One question about free markets is whether they can achieve social goals (and whether the social progress in the west is solely because of them). The extent to which markets are free (consider agriculture subsidies in the EU and US) is also debatable.
Krugman wrote a great piece on Friedman which you may have read.
The tricky thing about social goals is how they are to be defined. Economists use a concept known as 'Pareto optimality'. It takes you as far as possible without making interpersonal judgements. A situation is pareto optimal if no one can be made better off without making someone worse off. So even a situation where one person has all the wealth is pareto optimal.
We do this because it isn't objective to say that person x deserves money more than person y. i.e we treat x and y as identical and as long as either of them are made better off we're happy.
Now if markets are well functioning the equilibrium can be proved to be pareto optimal. No dispute there. The reason why non-economists take offense is the fact that it doesn't make (common) sense to treat Bill Gates the same as you treat you and me. But that is a vlue judgement and an objective science shouldn't be swayed by such subjective arguments.
Development is a strong branch in its own right. There are a lot of philosophical nuances which have to be taken into account when we think about equality, welfare etc. Then it has to be expressed mathematically. So there is a lot of difficulty there.
Trade will make both traders better off if trade is free. Unfortunately the WTO trade conditions are ensure that trade is anything but free.
Thanks for the link. Was a great read .. my this is a long comment!
Excellent comment George.
Thanks krull.. you don't seem to be online these days.. whats up?
I am almost always online, just keep my status on `Invisible'... It helps me concentrate on what I should be doing! But drop a line, I should be around...
Hmm. I don't think economics can yet be described as a science on the same footing as physics or chemistry. The methods used may be scientific, but many of the assumptions and conclusions are either unfalsifiable or unverifiable.
The deepest question of all is whether everything about human interaction can be expressed mathematically. And also, whether a mathematically optimal solution is desirable to begin with. Notions of optimality can lead quickly to social darwinism, and from there racism, bigotry, and colonialism are a stone's throw away. But perhaps those are mathematically optimal solutions, eh? Hehe.
The trade-off seems to be between precision and relevence. The mathematical modelling of human interaction still seems like an ambitious target.
I think that in effect we do not end up modelling human behaviour per se but instead model the manifestations of such behaviour due to the trouble associated with observability. Like, we can't model desire but we can model purchase/demand. Maybe thats why it ends up with seemingly contradicting results?
Notions of optimality ultimately requires a certain level of social acceptance for its achievement. This would be ok if everybody were rational. A documentary you recommended, The century of the self, clearly shows that this is not the case. Even an idea of social relevance can be presented in such a way that could 'sway the masses'. Iraq is a perfectly good example!
Yep, very true dismal b. (re: Iraw etc.) Which is why economics can never fully be dissociated from politics.
And I'm glad you saw the Century of the Self! Great stuff. Watch Adam Curtis's other documentaries too.
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