Wednesday, June 10, 2009
From Practical Economics: Freedom-Choice-Cost
Economist Arnold Kling says that there are three types of economists that believe in capitalism. Those that favor the free market with reservations and thus believe that because markets fail the government should be used in an attempt to fix the failures. Let‘s call these people pessimistic economists.
The second group favors the free market without reservations and thus believes that because markets work well, use the market. We can call these people optimistic economists.
The last group favors the market with reservations and thus believes that because markets fail we need more markets. They see market failures as natural and thinking in terms of perfect markets would be a bad approximation to reality. Because of this they do not look to government as a solution to imperfect markets because the market is more perfect than fallible government institutions that have the power of oppression and tyranny. Remember, governments do not have to face competition and the fear of loss. We can call this third group, practical economists.