The stupid, it hurts!

Evidence that markets work is used as proof that markets don\’t work……ouch!

But, according to the classical economic theory that is still fetishised in some parts of the blogosphere, an organisation like CAMRA should be unnecessary. Markets react to supply and demand. If there is enough demand for traditional beer, so the story goes, new firms will enter the market to satisfy that demand. However, when you look at what firms actually do, rather than what the theory says they do, the reality of markets is different. In many sectors, firms adopt industry standards which enable them to promote their collective interests at the expense of customers.

And our flipchartfairytaleman goes on to insist that the very success of CAMRA is proof that markets don\’t work.

Sigh.

\”Markets\” are not some box that you open and then through some equivalent of Brownian, random, motion get a structured society. Hayek\’s \”spontaneous order\” acknowledges that humans have desires (which molecules really don\’t), agency (ditto) and the ability to cooperate.

Our spontaneous order is thus an outcome of people cooperating by using their ability to act, their agency, to achieve their desires. Rather than, say, those people being directed to do something, legislated into doing something or even commanded, whipped into or executed for not doing that thing….all, recall, methods of human organisation that have actually been tried.

Such combinations of desire agency and cooperation are legion in any society: no one has ever quite, despite Pol Pot having a damn good go, managed to stamp it out. In our own society, looking back into history, we can see peeps thinking about unemployment and sickness and the needs for communal support in such times: we got the Friendly Societies. The Co Op started out as mutual assurance (assurance note, not insurance) against the known to be coming but unknown time of arrival of burial expenses. The cost of building a house was too high to be managed without mobilising communal savings: thus the Building Societies.

Given that all of these, plus innumerable others, were the result of voluntary action they are market responses, not non-market responses.

Which moves us to CAMRA. Overbearing prigs they have become (as with those cheerleaders for the Building Societies like Our Chuka) but they too started out as humans voluntarily using their agency and ability to cooperate to achieve their desire: a pint that\’s worth drinking.

And thus, far from CAMRA (or any other such voluntary organisation or banding together) being something which should be unnecessary in a market economy, they are exactly the manner in which a market economy works: voluntary, not directed, cooperation to achieve the desired goal(s). That spontaneous order coming from the application of the innate human abilities to use agency and cooperation to achieve a collective desire.

Flipchartfairytaleman\’s argument is that exactly what makes markets work is proof that markets don\’t work.

Ooooh, the Stupid, it hurts!

24 comments on “The stupid, it hurts!

  1. Tim, I didn’t say that markets don’t work, just that they don’t always work in ways that free market theorists would have us believe.

    Powerful people manipulate markets so you either need to get together and manipulate them back or legistale to stop those who collude to shaft the customer. That’s all I was saying, which is a long way from a denial of market forces.

    If you want to shoot down a straw man, feel free, but please don’t attach my name to it.

    Tim adds: So point to which free market theorists you mean then. I can’t think of a single one who would point to voluntary collective action as being a proof that markets don’t work.

  2. Snap – someone said exactly the same thing in the comments to my blog here.

    When I have more time tonight I’ll do a post linking to yours as it’s a point well worth making.

  3. It’s a lousy example anyway. The beer market has continually been assaulted by the State and the Temperance Movement. The fizzy crap that CAMRA was set up to campaign against was partially a consequence of State intervention in the beer market, and the whole age of austerity that had led up to the 70s with reduced consequent customer expectations in quality of food and drink in general. It had been hit by licensing controls, beer watering[1], rationing, cartelisation and so on.

    People arguing that free markets don’t work really need to use an actual free market as an example, rather than something the government has actively fucked up.

    [1] The government are now demanding that again, as we laugh at CAMRA who supported the smoking ban with “they’ll never attack alcohol”. Lol.

  4. Rick really does seem to be missing the point. The brewers were consolidating and thus making broad decisions about what to supply and trying to force them onto the market. The demand side in a retail situation consists of millions of people taking their individual buying decisions, based on personal taste, peer-group pressure, marketing etc etc. If some folks decide that the brewers are not supplying what they need they can either form a pressure-group like CAMRA or set up their own brewery or shut up. How many times do we hear people saying “there is no demand for it”? The fact that CAMRA were able to be effective is spectacular proof of a market adjusting.

  5. diogenes – Actually, that was almost the point I was trying to make. Markets don’t adjust on their own. Somethimes you need to get together and put pressure on them to adjust. And sometimes (and I dont expect Tim’s readers to agree with this) regulation has to make them adjust.

  6. “Markets don’t adjust on their own. Sometimes you need to get together and put pressure on them to adjust.”

    Is it not the case that suppliers often don’t adjust on their own, and so they need pressure on them to do something different? Which describes the operation of a market.

  7. You still don’t get it, do you?

    You ARE part of the market. Hence the getting together and creating pressure thing.

    Regulation doesn’t adjust anything, because most if not all regulations have unintended consequences and therefore, regulations are usually attempts to correct some distortion created by previous regulations. And when it comes to free markets, alcohol is not a great example. Maybe you should read up on free markets again.

  8. Rick,

    Are you viewing CAMRA as something external to the market?

    I’d say they are just a collective of purchasers lobbying suppliers for products they wish to consume. They are as much a part of the market as me or you.

  9. Anyway, there seems to be an assumption her that there wss a considerable demand for real ale that hte market wasn’t supplying. Is that the case? Or did CAMRA basically invent the real ale market?

    Was the soil association a response to an unsatisfied demand for ugly food, or did it create the demand for ugly food?

  10. To paraphrase Gareth above and the quote from the original post:

    CAMRA adopt industry standards which enable them to promote their collective interests at the expense of suppliers.

    You can say the same for trade unions vs employer organisations; large supermarkets vs farmers’ collectives. The ‘market’ is never perfect and different interests club together to strengthen their side of the bargaining. Whether the ‘market’ is better or worse afterwards is a moot point.

    But when people like ASH get the government to gang up against smokers and pubs, that is going too far, it was far beyond the need of non-smokers to have somewhere where they could sit and, er, not smoke.

  11. I didn’t say that markets don’t work, just that they don’t always work in ways that free market theorists would have us believe.

    Which free market theorists? Adam Smith? The bloke who said:

    “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

    Powerful people manipulate markets so you either need to get together and manipulate them back or legislate to stop those who collude to shaft the customer.

    And a very popular way for powerful people to manipulate markets to shaft the customer is by legislation. To quote Adam Smith again:

    But in the mercantile system the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce.

    It cannot be very difficult to determine who have been the contrivers of this whole mercantile system; not the consumers, we may believe, whose interest has been entirely neglected; but the producers, whose interest has been so carefully attended to; and among this latter class our merchants and manufacturers have been by far the principal architects.

  12. Pingback: The Campaign for Real Ale: Capitalist or Not? « Left Outside

  13. Rick is assuming that an advocacy group like CAMRA is somehow not part of a market. But at least initially, CAMRA was an entrepreneurial venture, in that it sought to get together pe0ple of shared interests who wanted to highlight something they valued (beer, whatever) and became very successful, so much so that pubs, realising a previously untapped market, tapped it (excuse the pun).

    Markets are simply places where people voluntarily transact. Not all participants need to have “perfect” knowledge of folks’ tastes or preferences, and an entrepreneur who creates a “new”, or previously unmet demand for something is providing new data. That is what the real ale enthusiasts did: they demonstrated that there was a demand for something that brewers had hitherto not fully grasped.

    And I would argue that CAMRA has worked far better in achieving its goals in the way that it did than say, a group trying to lobby government.

  14. Imagine the mess we would have had if the beer available in your local boozer was chosen by a government committee.

    If you like the sound of that, then you can argue that free markets don’t work.

  15. It seems like a lot of the commentators here are missing the point. The market is a conspiracy of some old white men sitting in a room and trying to screw us all destroy the world. The nice people that we know (e.g. this CAMRA stuff) is therefore not part of the market, just like we consumers are of course not part of the market (at least not those of us who have good intentions). Simple ain’t it?

  16. oh dear, emil is another person who thinks that the market consists of the supply-side alone. For reference, the market consists of a supply-side and a demand-side. Each side is always trying to rig things in its favour but the supply-side finds it easier because of forces such as horizontal and vertical integration. These are harder to achieve on the demand-side.

    Does this really need to be said?

  17. For reference, the market consists of a State-side and a private-side. Each side is always trying to rig things in its favour but the State-side finds it easier because of forces such as a legislature, a bureaucracy, a police force, an army and absolute power. These are impossible to achieve on the Private-side.

    Does this really need to be said?

    /fixed

  18. diogenes

    “are you sure, ukliberty? it seemed very poe-faced to me”

    Uk liberty is right of course

    ” Each side is always trying to rig things in its favour but the supply-side finds it easier because of forces such as horizontal and vertical integration. These are harder to achieve on the demand-side.”

    Not sure I fully agree with this though. I wouldn’t say that it’s easy to supply to Tesco or Ikea. If you limit the demand-side to being residential consumers then maybe yes

  19. CAMRA was indeed entrepreneurial in the beginning. My father was involved quite heavily in the early days. I had my first taste of real ale at one of their travelling roadshows back in ’74 or so (and now I sound like one of the Real Ale Twats – in my defence, I was five.) There’s a much-loved half-pint mug with their logo on it sitting in my mother’s kitchen.

    Of course lobbying is a legitimate part of the market. But unlike the revolting ASH, CAMRA weren’t pressuring government to stop people doing something. You could still get bloody awful Watney’s Red Barrel if you wanted it.

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