As anyone who knows the slightest thing about market theory will be aware, it suggests there are some quite strict conditions that must be met if markets are to be what an economist might term efficient in allocating resources appropriately. These conditions include the absence of large market players who can dominate sectors and set prices; the availability of consistent and accurate information on the activity of all market participants to all who wish to engage in the market; access to capital for all who want to supply so that they have the chance of doing so and, of course, an absence of systemic bias that might favour any one participant over another, so giving them an unfair advantage.

Most who know anything about market theory say that’s the model at the limit. Much of the rest of economics is about how close is the real world to that model? Further, how close does it have to be for market resource allocation to be efficient?

The answers being not very and very little.

That’s why we do indeed say that the big four UK supermarkets – used to at least – have pricing power and yet the shops are full while Venezuela starves. We also go on to say that the cure to those ills like pricing power is more markets – Aldi and Lidl come to mind as the latest competitors providing that. We even see that decline in supermarket pricing power in their annual results.

BTW, Hayek also proved that perfect information isn’t possible to collect. Which is the other reason we use markets, for planning is even worse in the absence of perfect information.

If only the Senior Lecturer at Islington Technical College had paid attention in his introductory economics lectures.

14 thoughts on “Rilly?”

  1. Murphy on economics is like reading a dentist describing how to build a nuclear reactor. The job of an economist is to describe how markets work and why certain markets do not work. No economist talks about appropriate and efficient allocation of resources. That is the job of a megalomaniac or the sort of person who wants to write for the Guardian or get a non job at a non university

  2. As anyone who knows the slightest thing about market theory will be aware

    Ruling himself out in the very first line.

  3. Tim

    He walked out of the lectures (At Southampton I believe) on the grounds it was ‘all nonsense’ – you can’t learn that kind of ignorance, it’s inbred.

  4. @Van_Patten

    “you can’t learn that kind of ignorance, it’s inbred.”

    Curiously apt turn of phrase, given his current residence…

  5. “when wrong I accept it. It’s a rare virtue.” – Richard murphy.

    Fuck me. He really does say that. Not only claiming but claiming it as a rare virtue.

  6. AndrewC

    He probably meant that he is rarely virtuous.

    It should read “when wrong I rarely accept it. It’s a vice”

  7. @ andrewc “when wrong I accept it. It’s a rare virtue.” – Richard murphy.- the true humility of a holocaust survivor.

  8. NO, no, no
    Those are NOT conditions that *must* be met in order for markets to be efficient. The list of conditions are those that, if met, will ensure that the matrket is efficient.
    It is the difference between “an entirely blue sky is cloudless” and “a cloudless sky is entirely blue”. Sometimes the latter is black.
    Murphy will drive me to drink if Tim publishes too much of his warblings.

  9. Bloke in Costa Rica

    “As anyone who knows the slightest thing about market theory will be aware,”

    That’s like a Young Earth Creationist writing, “as anyone who knows the slightest thing about palaeontology will be aware”. Murphy does know the slightest thing about economics. He knows he’s agin it.

  10. The thing is that, regardless of the list of things that would help markets to be or ensure that they are “efficient” (and as an engineer, I would note that the only machine that runs at 100% efficiency is where the input, as well as the output, are zero) that there are very few circumstances where even an admittedly inefficient market is less efficient than the alternatives (state control, monopoly, monopsony etc.)

  11. Somebody posted the ideal Christmas present (insofar as Murphy would permit celebration of such a neo-liberal and capitalist distortion of a holiday) for the LHTD.

    “TWUNT: For when neither Twat not Cunt are sufficient!”

  12. BiCR,

    Seen much of the world, have you? To paraphrase Rob above: “Opens closet, removes ‘Creationist’ strawman, lovingly dusts it down, then fondles it for ten minutes.”

    As to the other duffer, does anyone know where he gets the “These conditions include the absence of large market players who can dominate sectors and set prices” notion from? It’s redolent of yesterday’s ‘too big to fail’ discussion: there’s nothing wrong with market dominance per se, it’s barriers to entry that are important.

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