Richard Murphy (and I quote in full, so that you get the full flavour):
I thought I’d finished with Tim Worstall. But not quite as it turns out, for he left a comment on this blog yesterday which really does blow his whole position apart.
It is impossible to suppose that a man who can argue (as you did in the Guardian, very recently) that “Things in markets are worth what the markets say they are worth” is a true heir of [Adam] Smith
His response? This:
As I’ve said before, no one thinks that all markets all the time produces the optimal allocation of resources.
The argument is not over whether markets *always* produce either “just and moral” prices, as opposed to simply market prices, or whether they *always* produce an optimal allocation of resources. It’s over when and where do they and when and where do they not.
That’s fine Tim. I agree. But let’s be clear what you have conceded here. What you’re saying is:
1) Markets don’t necessarily produce the optimal allocation of resources;
2) We don’t know when they do, and when they don’t;
3) In that case the economics you espouse provides us with no useful information – we’re left making our own choices;
4) In that case you either can’t sustain your claim that economics is a rational science, or alternatively you can say it is, but the results it produces are of no use to anyone;
5) As a result economic decisions are always subjective;
6) The economic theory you espouse can never be used to justify intervention in the economy because it is clear that it cannot predict optimal outcomes, and we could not tell is those had been achieved in any event.
Put bluntly, this means you’re about as far away from objectivity as it is possible to get: you pretend you’re objective when you know you’re not. That’s not just a failure of objectivity and a lapse into subjectivity, it’s rank hypocrisy.
And it’s rank hypocrisy that you use for a particular purpose, which is always to favour markets when they suit the well off and to oppose regulation when it suits the least well off. This is readily apparent from your argument against the minimum wage recently where you said there was a moral argument for abolition because this interfered with market outcomes: market outcomes you now admit you cannot predict. The only morality on offer therefore was your own, designed in this case to harm the well-being of those on the lowest pay in our society.
At some points over the last couple of weeks I seriously wondered why I bothered to engage with you. Now I know two things: one you definitely do not know what you’re arguing, and second that all the arguments you and your ASI colleagues put forward for the supremacy of the market are pure bunkum: they’re simply a subjective argument for the endowment of favour on those you choose.
It was worth getting to this point. The argument with you has been won. I’m satisfied with that outcome. So please don’t bother me again: it’s now abundantly clear it’s not worth my time dealing with you or your like.
I\’m not really sure what to do here other than snigger.
1), yes, of course, we all agree that markets and markets alone do not necessarily produce the optimal allocation of resources. I\’ve already in this (long) series pointed to any number of such examples.
2) We don\’t know when they do and when they don\’t? Blimey! So what is this economics thing then? It is, at least in part, a study of when they do and when they don\’t. As above, I have given a number of examples about when economics (no, not "neo-liberal" economics, not "right wing", not anything other than simply the standard economic toolkit) tells us that pure and unadorned markets do not give us the optimal allocation of resources. Externalities for example, pollution is a good one. Ronald Coase pointed out that a pure market solution may or may not work: it depends upon transaction costs. Alan Walters (from his Times obituary: " In 1968 he published the Economics of Road User Charges,"….the paper that led directly to the London Congestion Charge. Again, a study iof how we deal with an externality and in this case, one where the transaction costs make a pure market solution impossible). Or the entire system of copyrights and patents: we think that creation is a public good, public goods are undersupplied in a pure market because the creator cannot appropriate the value that is being created. Thus we rig said markets to get to a better, if not entirely optimal, outcome.
3) No, economics informs those choices.
4) As points 2 and 3 are false, then so is the conclusion, 4, drawn from them.
5) Now there is indeed subjectivity in the system. Of course there is. But it\’s not in the economics. The statement that "a very high minimum wage will cause unemployment" is not subjective. It\’s a statement of the blindingly obvious. Similarly, the statement " a very low minimum wage will make no damn difference" is not subjective, it\’s similarly a truth. "The current minimum wage has some good effects and some bad effects" is yet again, simply a truth. The subjectivity somes when someone says, "I think the good effects are worth the bad", or, the opposite "I think the bad outweighs the good".
Economics can be and is used to tell us what those effects are: whether we prefer one set to the other is subjective, not the analysis of what they are.
6) The economics I espouse is indeed used to justify interventions in the economy. It\’s used to do that each and every hour of each and every day. See, say, carbon taxes, cap and trade, congestion charges, copyrights, patents, anti-monopoly laws, and so on nearly ad infinitum.
This plays onto the morality thing mentioned. Morality is of course personal and is thus subjective. But that\’s how we make the choices between the various options that economics reveals are available to us. That we might differ here is unsurprising: but to reject economics itself because it reveals those choices is absurd.
Worth remembering what I was actually arguing for as a moral precept there as well. That if we, societally, wish to change the outcomes of the market pricing mechanism then we, collectively and societally, have to be willing to pay to do so. Rather than dumping the costs onto some subset of society.
I find it very hard to see that as an immoral position but do agree that it\’s not an economic point, it\’s a subjective one.
And as I also argued, we should stop taxing the working poor. how this harms the well-bing of those on the lowest pay in our society I\’m really not sure.
As to who has "won" this argument I\’ll let others decide that. I certainly don\’t think that Richard Murphy has, but then that\’s probably me just being subjective.