I've always thought "free market" was a vague buzz word. Just like any social definition (socialism, capitalism, liberal, etc.), it fails to mean anything because it is so widely used. It's nice to see Noam go beyond the blanket definition and talk about all the different aspects of free market.

"I will be able to rant and rave about the marvels of the free market while I am getting properly subsidized'

I don't think Noam understands what a free market is.

^That's why he calls it a fantasy, because it doesn't exist. I'm sure the idealized 'Free Market' of your imagination is a beautiful thing, but as we've seen over the past few decades, it's just too vulnerable to corruption to ever make the jump from abstraction to reality.

^so it doesn't exist, but it was vulnerable to corruption in the last few decades? I'm not sure you can have it both ways, so which is it?

>> ^dystopianfuturetoday:
^That's why he calls it a fantasy, because it doesn't exist. I'm sure the idealized 'Free Market' of your imagination is a beautiful thing, but as we've seen over the past few decades, it's just too vulnerable to corruption to ever make the jump from abstraction to reality.

^It exists, but not in the way you, Ayn Rand and Milton Friedman would like it to exist. The so called 'free market' exists just as Chomsky describes, with no regard or respect for labor, natural resources or society in general, and no qualms about taking huge bailouts.

Arguing that free markets need to account for decent labour standards, pay sufficient regard to environmental degradation and society in general is like arguing against science because it doesn't invoke a purpose to life or a sense of morality. Free market capitalism by itself is insufficient, you'd find hardly anyone sane-minded who would argue against that. By all means it needs to allow for various types of intervention such as collective worker representation through unions and environmental protection laws among others to curb negative externalities while promoting any positive ones that may arise.

Hardly anyone would genuinely argue that a free market can operate without exception. To say that it has not existed over the past few decades though or that is has had entirely pejorative effects is just not true. A lowering of protectionist policies has massively benefited developing countries particularly in eastern Asia, raising living standards and numerous people out of poverty, spurred by consistently high growth. This has in turn lowered costs of production for consumers in developing countries and fostered additional competition and innovation.

Of course there is always an incentive to game the system and chase rent seeking over innovation. In some cases there are quasi-valid arguments for various types of assistance. Whether it be infant-industry arguments or a state's desire to personally engineer an emergent industry such as Obama's intention to make the US a global leader in green energy development, or to facilitate a slow dismantling of an industry that would had otherwise caused mass repercussions had it been allowed to fall simultaneously on it's own. I would pin more blame on the state of campaign finance contributions and how industry groups can wield such extraordinary influence over the policies over supposedly democratically elected representatives. A lack of transparency, which will hopefully be remedied will also allow greater public oversight over wasteful intervention should also hopefully illuminate any wasteful and unsubstantiated subsidisation.

RedSky is right essentially but the point needs to be made that lately free market economics has been tied directly to improvements in standards of living for all in the same way tax cuts are supposed to ignite economic activity.

Free markets are a sub component of good economic policy but it is not the be all and end all, for the last 40 years the system has served well in allocation of resources however we are starting to living in a world where commercial activity must take into account its externalities.

Something the free market never accounts for because of the sole pursuit of profit, social welfare, citizen welfare and economy welfare as a whole is secondary or even tertiary something seen in the sub prime market failures. Even more so when we start talking about efficient allocation of scare resources towards solutions. The choice is really about what kind of world we want to live in, one based on welfare of a population or simply commercial activity.

Furthermore the free market is never implemented equally, its always the free market on 'first world' nation terms, the rise of Asian economics is free market based but look at the restrictions imposed on China because its lower cost of production is thought as being unfair competition because of protectionist policy in the western world. A better case is agricultural production in the third world having almost no penetration in the first world, yet first world products are simply dumped below cost and destroy local industries.

The true costs or rather implications of free trade are never explained or understood by the general public, off shoring of jobs is a natural symptom of this system, yet look at how indignant the American population is at that idea.

True free trade would need a global realignment and cooperation because we head towards true trade based on comparative advantage. Explaining that to a steel worker in the US or a farmer in France is far harder.

If you really want to understand or discuss economics you should try to replace "free market theory" with "physics" and see if your arguments make sense. Economics is a science, not a social philosophy. Physics predicts what will happen when you drop a ball, and economics predicts what will happen when demand is increased. Physics does not say whether you *should* drop a ball, and economics does not say whether you *should* increase demand.

"Physics exists, but not in the way you, Einstein, or Bohr would like it to exist"
"Physics has no respect for labor, natural resources or society in general"
"Physics has no qualms about taking huge bailouts"

Do those statements make any sense?

>> ^dystopianfuturetoday:
^It exists, but not in the way you, Ayn Rand and Milton Friedman would like it to exist. The so called 'free market' exists just as Chomsky describes, with no regard or respect for labor, natural resources or society in general, and no qualms about taking huge bailouts.

^It is just as reasonable to question the ethics of science in practice as it is to question the ethics of a free market in practice. Especially in a discussion about the merits of removing democratic checks and balances.

When did this become audiosift?

(It's a fairly prescient talk considering that it was given back in 2002.)

Its like chasing your shadow...as soon as a point is contended another point arises.

If you want to discuss the ethics of certain actions why didn't you bring that up instead of claiming that free markets don't exist? First you said they don't exist, then you said they have existed in the last 20 years but were corrupted, then you said they are unethical in practice...what exactly is it you are trying to discuss?

>> ^dystopianfuturetoday:
^It is just as reasonable to question the ethics of science in practice as it is to question the ethics of a free market in practice. Especially in a discussion about the merits of removing democratic checks and balances.

@imstellar et al...

i don't know how to put this clearer.

the quest for profit does not and has never aligned with the best way to improve people's experience of being human.

this is because not everything can be measured in money.

so please, realise that a society based on money measurement could ever be the most efficient way of progressing civilisation.

it's just stupid. like saying that SAT's are a good way of improving education.

is capitalism better at filling supermarket shelves than stalinism? yes. we all agree on that. get over it.

^okay, but thats a different argument; economics is a science, not a philosophy. If you want to discuss philosophy I'm all for it...I don't care what we discuss but how about we pick something and stick to it until we see it through to its logical conclusion?

I'm on the same side as you are with respect to the philosophy. I don't think capitalism is a good way to run your life, but I do think it is a great way to run an economy. Capitalism enables a greater creation of wealth than most other, if not all, economic systems--which is important to me because I don't have to work as hard, or as long. I don't have to work 12 hours a day in a field doing manual labor because my standard of living has been raised through improvements in no short thanks to our capitalistic system.

I don't have to choose to my live my life based on profits, money, or material possessions; nor do I.

if economics was a science it would fucking work better.

and hunter gatherer societies worked only 4 hours a day. and drugs were legal.

>> ^MINK:
if economics was a science it would fucking work better.


Well I'll agree with you there, what is currently being practiced as economics in the US is not science.

It would, however, be incorrect to state that economics is not a science. There are many useful economic hypotheses which make very accurate predictions. By in large, we just don't utilize them in the US; we warp them with philosophy and politics for personal gain, turning them into little more than conjecture. Why should you blame science when people implement untested conjecture with disastrous results?

We didn't land on the moon with philosophy, politics, or untested conjecture, we got there with Newtonian mechanics. Imagine if, for whatever philosophical or political reasons, people were against Newtonian mechanics and instead chose astrology to guide the space program. How disastrous would that have been? Conjecture is not useful for human endeavors, whats useful is the knowledge we gain from science. You are correct that the philosophical question must be first asked: "should we go to the moon?" But once that is answered, philosophy needs to step aside and let science solve the question of "how?"

You can see how science, philosophy, and politics have been mixed into one great perversion simply by observing questions like "should we bailout large corporations in order to correct the recession?"

“should we bailout large corporations?” is a philosophical question
“a bailout of large corporations can correct a recession” is a scientific hypothesis.

Mixing the two is nonsense.

To put it in perspective, imagine NASA asking "should we use Newtonian mechanics to land on the moon?" or "should we use astrology to calculate our lunar orbits?"

Science does not pose philosophical questions. The proper question for NASA is "does Newtonian mechanics make accurate enough predictions to enable us to land on the moon?"

Wow. Upvote. Most clarity I have ever seen from you man, nice one.

However, I think you got a long way to go with "real economic science" before it can make predictions about crazy monkey behaviour society. I find a lot of economic models seem to work as models but then the dang humans go and screw up the theory.

Such simple assumptions as "if people can buy a product that is cheaper and of equal or higher quality, then they will choose that product" just don't work. Once you refine those models, you get deep into psychology and very very grey areas.

^MINK,

I will agree that the statement:

"If people can buy a product that is cheaper and of equal or higher quality, then they will choose that product"

makes too many assumptions to be useful in practice. One as you mentioned, is an assumption of the constancy of human behavior. Psychology is another field of science, and a good economic hypothesis must take human psychology into account. I can think of two alternative hypotheses, in this same vein, which have been shown to make very accurate predictions:

"When choosing amongst products of comparable quality, consumers are more likely to choose the cheaper product."

"When choosing amongst products of comparable price, consumers are more likely to choose the product of higher quality."

Note the introduction of probability via “more likely.” At its heart, economics is a model of human behavior and can thus only predict what is more or less probable. Probabilities are not a problem, as we see them in many other fields of science, including physics and biology. Probabilities can be very useful.

Science is the realm of “how,” and the economic question “how can I increase sale volume?” is answered by testing hypotheses such as those above. These two have been extensively validated, so when a small business owner wants to increase their sale volume, they can be confident that on average, lowering the price of their products or increasing the quality of what they produce will achieve this goal.

"more likely" raises the question "when is it more likely?" or "is it more likely in some markets and less in others?" and those questions are constantly trying to be discovered by market researchers, who are always one step behind consumer opinion ... also they have the problem that people lie in market research tests, consciously and subconsciously.

i remain suspicious that however much you refine a model of economic activity, humans by their nature have this thing called (i guess) "fashion", which constantly fucks up the rules of what is and isn't economically viable. I think if you managed to somehow model fashion and use that model to sell stuff, the very nature of fashion would change, and your model would be broken.

it's like the uncertainty principle... you can know what a consumer wants but not when he wants it, or you can know when he wants it but not what it is

^MINK,

"more likely" raises the question "when is it more likely?"

That is true. All models must define the region in which they are valid. Newtonian mechanics is great as long as you aren't going near the speed of light. Still, doesn’t Newtonian mechanics allow us to make better predictions, even in a limited region, than astrology for example?

"I think if you managed to somehow model fashion and use that model to sell stuff, the very nature of fashion would change, and your model would be broken."

Models of fashion may have a very short shelf life, as you state, but can’t they make reasonably accurate predictions during a specific time period? If a producer wishes to discover a market for popular goods, they have three choices: guess, pray, or research. Studies can be flawed, for sure, but on average they provide more useful information than wild guessing.

Science is not absolute. All we can do is strive to make better predictions by replacing old models. Two thousand years ago, pi was given as 3.0 in 1 Kings 7:23, which is wrong by only 5%. In high school you probably used 3.14, again wrong, but only by 0.05%. Nobody will ever know the true value of pi, but even inaccurate models can be useful--as long as they make accurate enough predictions for your purpose.

When new data emerges, as in the shift from Copernicus to Newton, old models are shed and new models surface. It is not to say Copernican models were not useful—-they were—-they were only replaced because models which make better predictions came along. I think a similar argument can be made for human fashion.

Science, including economics, is okay with broken models because science is not committed to any particular model. When a new model emerges, and all the old models are disproven, scientists rejoice because they are newly able to make more accurate predictions; and that is the true goal of science.

of course i know what you're saying, but newtonian physics is WAY closer to predicting the effects of gravity than economics is to predicting consumer behaviour.

broadly speaking, i think all the people "guessing and praying" are the ones using their instincts and talents to smell out future opportunities. They are comfortable with the idea of marketing as an art (as opposed to a science). Some people win by lucky guesses, and that's ok. But.... the people "Researching" are just looking for some voodoo numbers to show the board of directors to back up their hunch. Or in extreme cases such as industrial food, they are researching how to trick people into buying utter shit (and that's just not nice, even if it is profitable).

and my point was, if you refined the model so well that it could predict fashions, then fashion itself would change, as if to deliberatly thwart your model. so why chase your own tail like that? why not research "talent" instead and encourage that instead of insisting everything is turned into a statistic?

in most arguments i have with "Scientists" it comes down to them saying "yes but science is always refining the model" as an excuse for all failure.

it just reminds me of how the war in iraq was "refined" over time.

interesting to see peoples opinions 4 years after this post.
which was recorded in 2002.
*promote

Promoting this video back to the front page; last published Saturday, February 28th, 2009 12:32pm PST - promote requested by enoch.

The primary problem I have with "free market" devotees is that they believe in an "all or nothing" paradigm. They think that everything has to work within a free-market model, and anything that deviates from that is communist and evil.

And I have a big problem with people who try to equate capitalism with mathematics, because the two are not analogous.

Capitalism is not an absolute law any more than a board game is.