Today\’s Ritchie

By definition the market requires failure


Voluntary exchange requires failure?


A market is simply people exchanging goods that they value less for goods (and or services of course in both) that they value more. That\’s it, tout court.

Thus, as long as such exchanges are voluntary, there are no losers and no failures in markets. Everybody is better off than they would be without the market and the exchanges.

Now we can go a little further and state that markets \”fail\” sometimes, in the sense that we can do better than markets. And indeed this is true, sometimes we can. But that does not mean that a market is worth less than the absence of that market. Merely that we can do better than that market.

We can even go further and point out that we do sometimes see failure in markets. A company goes bust, an individual cannot earn a living. But these again are not requirements of markets. All that is happening is that said market is uncovering the fact that the company is not adding value, the individual does not have the skills or opportunities to make a living.

In that latter case of course I agree there should be a safety net.

But it\’s a very long way from markets provide the information that there are failures to claiming that markets require failure. A very long and wrong way indeed.

6 thoughts on “Today\’s Ritchie”

  1. In Ritchie-speak, “failure” and ” an absence of state control” are synonymous.

    Brainless twat.

  2. The Pedant-General

    Other common forms of “market failure” are caused by asymmetry of information – such as plagues the second hand car market – and failure to account for externalities.

    I submit however, that our favourite WGCE needs to demonstrate quite why a remotely planned economy would be LESS subject to those problems and he might struggle to do that…

  3. Of course, it is true that a healthy capitalist economy must allow failed businesses to go bust, as part of the necessary if painful reallocation of capital to places that can make best use of them. But somehow I doubt that is what the pathetic Mr Murphy means.

  4. “Thus, as long as such exchanges are voluntary, there are no losers and no failures in markets.”

    I think this might just be loose writing and/or not using the word ‘failure’ in the technical sense of ‘market failure’ because of course there are lots of market failures possible where exchanges are voluntary (asymmetric information, externalities, whatever)

    we could be charitable to Richie and say he means that the world being what it is, market failures are inevitable. But market failures can be addressed (by intervention) and even if they persist market failures needn’t mean anybody has to starve. If he really means some sort of ‘bad outcome’ for somebody is inevitable under markets, he might as well write that in an uncertain world some sort of ‘bad outcome’ is inevitable under any conceivable system, including whatever system he advocates.

    but he don’t think he means that – I think he means something more like “for somebody to win somebody else has to lose”, which of course is daft too.

    if he means anything coherent at all … which is unlikely. I think he just likes to string together impressive sounding sentences.

    I realise that a mouse may look at a king, and that big shots get things wrong, but really, R Murphy versus S Brittan is not much of a fight.

  5. actually Tim, the error is all mine – Murphy was not using failure to mean market failure at all, was he?

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