Free market ideas always sounded like cartoon level intelligence to me. Some kind of a perfect world where everyone acts morally and people are well informed and chooses the right companies etc.
its really absurd. it becomes even stupider when considering that many of these assumptions allow mathematical models to be built on top of them, and then those models are treated with such importance and authority. but then they sometimes also get the math wrong. i remember learning a while back that part of the 2009 housing crash was caused by faulty mathematics laid ontop of these weird economic assumptions. the part im talking about is:
The paper, generally referred to as the Dahlem report, condemns a growing reliance over the past three decades on mathematical models that improperly assume markets and economies are inherently stable, and which disregard influences like differences in the way various economic players make decisions, revise their forecasting methods and are influenced by social factors.
the first part refers to a kind of “smoothness assumption”, where they approximate the bumpy, jagged graph with a “smooth” curve that is easier to analyze. but it turned out the bumps were there for a reason. oops! the second part of the quote then says that in addition to the faulty smoothness assumption, there were quite a few important things the model flat out ignored
It doesn’t require people to act morally, it requires them to act according to their long term self interest, assuming they are… immortal. And we all know human beings are omniscient and immortal. So no problem. /s
But it doesn’t, it just requires people to act in their short term self interest, and government’s role should be to ensure the long term costs are included in current market prices. So things like Pigouvian taxes and regulations should increase short term costs for things with long term costs.
The problems we see aren’t problems with capitalism (capitalism is working as expected in serving short term interests), the problem is with governments not doing their job in accounting for longer term costs.
But that’s not how it works. Free market ideas don’t expect a perfect world, they instead expect an imperfect one. You don’t need everyone to make food decisions, you just need enough people to make good decisions so the market caters to them.
It’s the same idea as democracy, you don’t need every voter to make a good choice, you just need a plurality. As long as enough people make decent choices enough of the time, democracy works. The free market is just democracy, but with money instead of votes.
In both cases government has a role. I think governments should add in longer term costs to the market, but in a way that preserves choice as much as possible (i.e. carbon taxes instead of carbon limits). I think governments should educate the population to increase the chances that they’ll make good decisions at the polls.
In the specific case of Microsoft, things were competitive until the government looked the other way WRT antitrust law. There’s a lot of shady stuff that happened in the first couple decades that Microsoft existed, yet they largely got a free pass.
All the big corps get a free pass because of money and power, and this is why free market doesn’t work.
Democracy doesn’t work either since media is owned by big corps as well. People can only know what they are allowed to know. If you are rich and powerful, you manipulate the media and you manipulate entire elections and decisions.
After a while, you actually see how all these systems are manipulated dally.
Our democracy in the US has lasted ~250 years despite all the nonsense from the rich and powerful. So I think enough of the voting public pays attention to keep things afloat. It has been a slow march downward imo, but nothing unrecoverable.
I can’t speak for the rest of the world, but the US seems to go in cycles. That’s how democracies seem to end up working, the public gets annoyed enough and demands change, so things get better for a time and then slowly get worse. Then the cycle repeats. It’s basically two steps forward, one step back, repeat ad infinitum. Just think, 100 years ago we got women’s suffrage, and now that’s a given and we’re fighting over abortion and equal pay. 100 years before that we were fighting over literal slavery. Some years down the road, we’ll likely take those as a given and be fighting over something else.
Democracy works, it’s just a messy process that can take a while. But it has worked so far pretty well.
the problem is that not enough people make “good decisions”, partly because of how exhausting and time-consuming it is to carefully analyze and consider all the options for every facet of life. for example, there are lots of people who don’t want to switch to linux because they think its tedious to pick a distro, learn a new operating system, and find replacements/workarounds for software that doesn’t work out of the box on linux. now imagine having to do that for every single aspect of life. how do you pick your toothpaste and deodorant? do you carefully examine all the options each time you go to the store, or do you have a brand you pick without thinking about it because it works fine enough?
another problem with free markets is the inherent progression towards monopolies. this can be seen most readily with the so called natural monopolies (monopolies that emerge because of an extreme barrier to entry). how much choice do you have when it comes to your electricity provider? if they do something you don’t like, what can you do other than complain to a politician or move to a new region? aside from natural monopolies, we also see a progression towards monopolies because of inherent efficiencies of producing at scale.
there are other problems as well, such as corruption/lobbying, companies lying to the public, using psychology to manipulate people (link may not be the best source on the subject).
something that i personally find to be a great example of how the free market works in practice: rupert murdoch (among several others working at fox news) knew the 2020 election was not stolen, but pushed the narrative anyway because they didn’t want to upset their viewer base.
partly because of how exhausting and time-consuming it is to carefully analyze and consider all the options for every facet of life
And that’s solved with trusted sources. I personally don’t analyze what toothpaste I get, I ask my dentist or look for the support by the American Dental Association. I don’t analyze every car on the market to make a decision, I ask mechanics for opinions and buy the cars they see in their shop the least (or look at defect rates and whatnot that are publicly available). For video games, I read reviews from sites that have given me good advice in the past.
It’s often a lot easier to figure out who to trust than it is to figure out which products to buy. And with a free market system, there’s a lot of competition both at the product variety side, as well as the product review side, so bad products tend to die and good products tend to succeed. It’s not perfect and it takes time to work, and sometimes the market needs governments to step in when the process gets messed up (e.g. manufacturers exerting control over the review process through bribes, intimidation, etc).
inherent progression towards monopolies
This is almost exclusively due to cronyism. For example, ISPs form monopolies by getting regulations passed that discourages new competition, and then sue whichever groups are left so that entering the market costs more than they could hope to earn back. Or companies like Microsoft violate antitrust laws or other anti-competitive practices (i.e. requiring PC manufacturers to pay for Windows/DOS even on PCs that don’t ship Windows/DOS, artificially making third party web browsers slower due to blocking APIs, etc), yet they get off with relatively little consequences (AMD v Intel is a counter-example, where the lawsuit was substantial). And so on.
In your example about electricity providers, that’s because the deals are made between the power company and cities, not between individuals. I think people would likely be better off if there was actual competition there. Basically, the city would maintain all of the electricity infrastructure in the city, and individual citizens could choose between providers based on cost, eco-friendliness, service, etc, and the cities would require a certain level of power quality (cleanliness of signal, stability of generation, etc). So if you’re getting ripped off, it’s because of cronyism between the power company and your city/county.
Maybe electricity is a poor option for this (idk, I’m not an expert), but it seems to work pretty well for ISPs. In my area, the city owns the network and you buy service from private companies, who then pay the city a certain amount to maintain the network. If your ISP sucks, you pick another one that offers service on the network, which is a pretty smooth process.
Capitalism works best when you expect selfishness and have the government set and enforce rules. If something cannot feasibly be offered in a competitive fashion, the government should step in and provide it as a public good. Some other things I think should be government-provided:
- ambulances - IMO, if a paramedic decides that you need an ambulance, it should be billed to the city/county/state; this also goes for emergency care until you’re stable enough to make a choice as to where to continue care
- city utilities - I can’t pick my garbage company, have competing sewer and water lines, etc
- transit - roads, rail, etc should all be publicly owned and operated in the interests of reducing congestion and improving public needs
If something could be competitive but isn’t, that’s a case for antitrust to step in.
corruption/lobbying, companies lying to the public, using psychology to manipulate people
Those happen regardless of structure. It happens a lot in autocracies, democracies, and everything in between. It seems to happen less in smaller communities, which is why I prefer to have each level of government be as small as possible while remaining effective.
rupert murdoch (among several others working at fox news) knew the 2020 election was not stolen, but pushed the narrative anyway because they didn’t want to upset their viewer base
The only overlap with the free market is that we have a mix of trustworthy and non-trustworthy sources. I count Fox News and CNN both as relatively untrustworthy and always look for second or third sources if anything seems a bit surprising. For example, Fox News claimed the election was stolen with few facts, CNN and a bunch of other sources said it wasn’t, along with a bunch of facts. So I don’t believe Fox News.
The fact that a number of people believed Fox News isn’t particularly important, what’s important is that most people didn’t believe Fox News. This poll states 55-58% believed Biden was the rightful winner of the election, and that’s with a heavy disinformation campaign.
Just think how much worse it would be if the government were in control of the media. We could potentially have those numbers flipped, with the majority believing that the election was stolen.