Chaining the Beast

To sum up:  keeping modern civilization going is incredibly hard.  The market solves the problem but at considerable human cost.  And the only alternative to the market that we’ve thought of both doesn’t work and is crueller than the market.

What we’re left with is a market system with an overlay of redistribution on the top meant to mitigate the damage that a pure market does.  The idea is that we get the intelligence-aggregation properties of the market, but then we take some of the wealth that accumulates at the top and give it to the people in poverty at the bottom, and as such prevent rack and ruin.

The big question, then, is how exactly does that redistribution get accomplished?  The economist consensus is, “as simply as possible.”  Economists (in general, with notable exceptions) want the intelligence aggregation of the market to be as efficient as possible, and so they want simple, clean market interventions.  Their point is that if you just take some money from people at the top and give that money to people at the bottom, the market’s superintelligence keeps working the way you want it to.  It’s still doing the same thing, it’s just that the rewards are a little less and the penalties are likewise less harsh.  Less carrot, but also less stick.

Pretty much everyone who’s not an economist, on the other hand, wants lots of micro-targeted economic interventions.  They don’t just want to give the poor money, because the poor might not use the money “responsibly” (on things like food, housing, and education).  So they give them vouchers for food (food stamps), subsidized housing, subsidized education.  They don’t want to give money to people who aren’t trying to get jobs, so unemployment benefits cut off.  They want a company to stay within city boundaries, or to get out of city boundaries, etc.  We end up with, well, how all modern governments look.  Thousands and thousands of individual economic interventions.

The market is a resilient dynamic equilibrium.  By its nature, it attempts to work around weird interventions.  For example, if you have food stamps, but don’t want food and do want something else, you can get the food and resell the food for money (or barter it directly for whatever else you want)… to some extent.  This results in waste, though.  If the government had given you money directly, and then you bought whatever good or service you wanted, you’d almost certainly have ended up with more of that good than you did after you converted your food stamps to food and then your food to money and then your money to the good you do want.

It is certainly possible to pile up enough restrictions on top of a market that it collapses.  We are arguably seeing that in the peripheral regions of Europe right now.  But we’ve seen that it’s not easy to collapse it.  It can, clearly, bear a lot of interventions and still provide the goods and services that the modern world needs.

That is, at any rate, the modern status quo.  I don’t have a grand, sweeping vision to advocate for.  My belief is that many, perhaps even most, market interventions are ill-conceived and do little good, and that simpler income transfers would do as much good with fewer downsides.  But more to the extent that I have a didactic goal, it’s simply to present the economic system in terms of intelligence and allocation rather than wealth and growth.

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