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Monday, March 28, 2005

Capitalism, Socialism, and Imperfect People

As a finance professor, I am almost always in favor of free and competitive markets. However, when I discuss this with a non-economist, they often make an argument of the type, "but what about this market failure/inequity/problem?" Micha Gertner of Catallarchy answers:
Of course, the simple and obvious response to this answer is that market competition does not always lead to ideal outcomes. True. But the mistake here is comparing market outcomes to a theoretical ideal rather than the next best alternative. What is the next best alternative - or at least the alternative offered by critics of market outcomes? Government.

click here for the whole article.

The point is that you can't compare capitalism with imperfect actors to a government with perfect, all-wise actors. Given imperfect people, I'll take the checks and balances associated with competitive markets.

Question for class: order the following in terms of desirability (and support your answers):

  1. Capitalism with perfect people
  2. Capitalism with imperfect people
  3. Socialism with perfect people
  4. Socialism with imperfect people.

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