Markets are systems in which goods, services, labour, and financial assets are exchanged under rules that determine prices and terms of trade. They are not natural phenomena. They are created and governed by law, regulation, custom, and power.
First, markets are institutions:
Property rights define what can be sold.
Company law defines who can trade.
Contract law enforces agreements.
Competition law sets limits on monopoly.
Accounting rules define profit.
Tax law shapes incentives.Without these structures, there are no markets at all. The idea of a “free market” independent of the state is a myth.
I’m fairly certain that the market for cocaine is constrained by none of those things. Yet the market for cocaine clearly exists…..
Therefore none of those things are necessary for markets. Wholly open to arguments that some or even all of thm make markets better but they’re not necessary, are they?
Markets are fine if he (or people who share his worldview) control them is what the piece amount to. As Gamecock says he is a doctrinaire Communist who is responsible for the deaths of tens of millions and who is the embodiment of pure evil.
“Property rights define what can be sold.”
Well, no. They define what can be legally sold. Lots of Nazis looted art in Paris and flogged it.
“Company law defines who can trade.”
Kids that wash cars don’t have companies.
“Contract law enforces agreements.”
Again, legally.
“Competition law sets limits on monopoly.”
Again, might want to talk to dead drug dealers about that.
“Accounting rules define profit.”
For the sake of reporting, yeah. But profit is spend £10 on something, flog it for £12, make £2 profit.
“Tax law shapes incentives.”
Stopped clock etc.
A market transaction requires only three elements: a good or service, and two individuals who voluntarily agree to exchange it. Everything else is optional.
When third parties insert themselves into that exchange without the consent of both traders, it is rarely to create value — more often, it is to extract it.
It is to prevent joy.
Four elements: a means of exchange
Not necessarily. Barters and swaps only have three elements, but they’re a market transaction.
“Property rights define what can be sold.”
So is he saying that in the absence of a law saying you can own something, everything is up for grabs, not only physically (in an anarchic state the powerful can always take from the weak) but also morally? That the concept of ownership only exists if the State legislates it? An odd view for an (alleged) Quaker to take, given the existence of the 8th Commandment.
Everything is always up for grabs – it is only violence that prevents someone from taking what is ‘yours’. The difference is we have a state to do that violence on our behalf now.
You don’t own it if you can’t prevent someone else from taking it.
So you argue that there is no concept of ownership of anything, beyond what you can defend? Surely that means that stealing doesn’t exist, as if nothing ‘belongs’ to anyone, then it cannot be stolen? Who ‘owns’ anything at a given time is determined by who is prepared to use the most violence to get/keep it.
I would argue the concept of ownership is as old as humans. Older in fact, as animals well understand the concept too. And as such exists beyond the realm of ‘who has the thing right now’.
There’s a reason ‘possession is 9/10ths of the law’ is a truism.
Sounds very ‘european’ that, the idea that you can only do something if there is a law allowing you to do so, demonstrating why Murphy wants to rejoin the festering corpse that is the EU.
If someone did set up a market entirely independent of the rest of society someone like him would pop up and demand the state gets involved.It’s a typical socialist argument. “A perfect X can’t exist therefore X is useless”.
He’s a strange lad – for markets he’s involved in he seems pretty sound. The pricing of the tickets for his Cambridge money symposium with the incredibly patient and tolerant Colin Parry about right. Understanding the advertising value of his YouTubes.
But outside those zones, gold, share indices, TSLA, bonds, betting on elections, not a notion how voluntary transactions work and those institutions he said really help enable if it’s legal and between strangers.
Everybody is conservative about things that affect him personally.
Totalists love ‘systems’ because they provide a point-of-entry into other people’s business. As Altoseb says, no ‘system’ is needed. When commies say ‘systems,’ halt and think why.
Wut? Buying and selling has proceeded for millennia, WITHOUT government interference. Spud has convinced himself that interference is NECESSARY! An integral part of trade. A REQUIREMENT for trade.
Well, today, yeah. Western states have gone full fascist. In the US, it is virtually impossible to buy anything that doesn’t have government content. Even a loaf of bread has government required labeling.
And THAT is the problem with the West. They accept fascism. They demand fascism. Westerners believe, as Timmer does, that if totalist control is beneficial, it is okay. It is NEVER okay. Legislators argue over whether something is a good idea or not, but never over whether government has the authority to do what they are talking about.* Freedom has been ceded to the state; it matters not whether it makes things ‘better.’ The US federal government has 2,000,000+ employees making things ‘better.’
*This is the problem Gamecock has with Californians who move to South Carolina. They think they are conservative, because they didn’t like what the state was doing. BUT they still believe the state has the power to do whatever it wants to. I don’t want people here who think the state should have unlimited power.
When I was a wee boy we’d get together on Saturday mornings and swap comics. Here a Beano, there an Eagle, and yonder a Wizard. We’d have been astonished to be told that we were subject to Mr Ely’s panoply of oversight. All we knew was who owned the comic at one moment and who was prepared to swap what to get it.
..and at the end of your swap session, all of you left clutching things of greater value to you than the things you brought. You were all richer.
Thing is, markets are not limited to humans.
All of those species in which males compete to mate with a female. It’s straightforward market competition: the female wants the best set of genes for her eggs; the males compete to determine whose those are. That the eggs belong to that female, the sperm to those males, and that therefore they have the “right” to transact, is beyond doubt. The transaction is then entered and value – babies – created.
Markets pre-date states.
Therefore Murphy is talking through his hat.
Company law does not apply to sole traders
Accounting rules merely apply to accounting. Profit is the difference between income and costs and is unaffected (in reality as distinct from Mutphy’s imagination) by any pontification of ICAEW or IFRS {*reported* “profit” may be affected by the term over which you depreciate your market stall or van but reality is *not* affected by your accounting convention on depreciation).
Most people buying carrots or potatoes in the local market have no idea whatsoever abour contract law (I do know a tiny bit but I do not consider it when shopping)
Property rights define what can be sold.
I have stuff, which is mine because I can defend it. If I can defend it, I can also trade it with you for stuff you can defend.
Most people have outsourced defense to the police and the military, since they’re seen as more or less “fair”. Which means “corresponds to what I think is reasonable, not defending wild claims but defending all reasonable claims”.
The cocaine market is an example of a place where people are in most cases not outsourcing that defense. Or when it is outsourced, it’s to people other than the police/military.
I could go on, but it’s boring already to refute his cr*p. I guess he gets money to do this stuff, and I’m doing it for free. If I were paid, I’d probably be more motivated.
Especially since he’d be publishing the same thing tomorrow.
Can you sell a kidney?
Yes. Can you make a contract to sell a kidney? No. To be enforceable through the Court, a contract must be for a lawful purpose. Hence, mechanisms other than the Court for enforcing agreements for unlawful purposes.
A slight modification.
Can you make a contract to sell a kidney? Yes.
Can you go to a court of the government to enforce the contract? No.
Not all contracts need be enforced by the official courts.
Tax law shapes incentives.
Then it surely follows that it can also create disincentives, even though Spud stoutly denies such a possibility.
He is confusing ‘law’ with ‘legislation’ again. Natural, since we tend to equate the two, but they are not the same.
Legislation is what those with power decree will be done. Law is the way people agree things will be done. Good legislation follows law as much as possible.
I struggle to understand Spud’s points sometimes. but anyway
t know he’s the personification of evil with his fascist attitude.
Forget cocaine. In Oz the going rate for 20 cigarettes through the market as an institution that Spud describes is $40 at least (might be higher). The Double Happiness illegally imported brand I am smoking as we speak is $10 a pack. Cash, of course. Bypasses most of what he is talking about.
Yeah. What do you think the chances are that Albo’ll reduce the excise to allow the legal market to flourish again?
Oh!!! You agree with me do you??
There’s a deliciously grim section in the Frisby book on tax about the events leading to the Boston Tea Party. The supply chain was set, the customers enjoyed, and most of all the merchants were making money from importing the illegal supply from the Dutch East Indies. When the tariffs on the legal supply from the East India Company were nilled, those merchants went and smashed up the ships carrying the newly cheaper and legal cargo.
Yes, do reduce the tobacco tax, but there will be more pain at first as the criminals react to the change.
Bongo
Thanks for reminding me of the probable result of the tax reduction!!!!
Boganboy, the chance anyone (not just Albo) will slash tobacco excise to the point where I get back into the legal market is twofold – fat and slim. They would have to cut the rate by 90+% for me to even think about it. And I don’t think that’s politically doable for anyone. So black market, here to stay.
Bongo – good point. To some extent that is already happening, shopowners are being ‘encouraged’ to carry black market product. On pain of having their premises burnt down.
We had a similar problem in Canada a while ago, there was much smuggling through the Indian reservations that bordered both Canada and the US.
This resulted in (among other things) a very public weeks-long confrontation between the Indians and the Canadian military, though it didn’t (IIRC) end up in anybody being shot.
The government eventually ended up reducing the taxes.
They don’t have to reduce it to zero, just enough for many people to think it’s not worth the effort.
Bongo, criminals will react faster is my argument to anything anyone says about controlling a black market.
It’s not like no one knows where these places are. My local tobacconist is in a shopping mall and called The Smoking Club ffs. Very friendly place, no one wants to get banned 🙂
But NSW did an attempt recently to do a crackdown on four shops like that and seized 4000 cigarettes in total. Not cartons, not packets, but cigarettes, if you believe the report. They operate on just in time delivery it seems. Which is what I had always suspected, they keep minimal stock on site and ring in for resupply. Change the rules, they’ll change their model. If they get serious about it, I’ll probably have to start pre ordering.
This is likely involves a calculation of the penalties for being caught with too many (not to mention losing them), the coordination required to keep the customers coming back (if you’re always out and make them wait are they going to go somewhere else?), the visibility of the resupply trips, etc.
In other words, a market.
“Accountant” desires more control by accountants. Moron
Trade, and therefore markets, are as old as humanity. We know that primitive peoples traded items, sometimes over long distances with multiple steps. They had essentially NONE of the items Richie mentions. As an example, in Australia in pre-European contact times coastal tribes in Queensland traded stingray barbs (useful as spear points for hunting) with polished stone axes made from particular stone types not available locally. What’s more, the final recipient (there were multiple steps with the exchange rate varying along the chain) would not have spoken a language comprehensible from the original supplier.
Markets can be simple, and in a lowly populated locality the only rules are “if you want to trade more than once, you must reach a mutually satisfactory deal”. And you trade because it is beneficial to both sides. In a densely populated local where one might well be able to carry out a series of one-off fraudulent trades to the overall detriment of the society, then some extra rules can make considerable sense. But the point remains and has been expressed numerous times by multiple thinkers, trade that benefits both sides occur effectively spontaneously, and rules as such self emerge.