Trading in Myths

21 Aug, 2017 at 18:57 | Posted in Economics | 2 Comments

Pretending that the distribution of income and wealth that results
from a long set of policy decisions is somehow the natural workings of the
market is not a serious position. It might be politically convenient for
conservatives who want to lock inequality in place. It is a more politically
compelling position to argue that we should not interfere with market
outcomes than to argue for a system that is deliberately structured to make
some people very rich while leaving others in poverty.

rigged_coverPretending that distributional outcomes are just the workings of the market is convenient for any beneficiaries of this inequality, even those who consider themselves liberal …

But we should not structure our understanding of the economy around political convenience. There is no way of escaping the fact that
levels of output and employment are determined by policy, that the length
and strength of patent and copyright monopolies are determined by
policy, and that the rules of corporate governance are determined by policy. The people who would treat these and other policy decisions determining the distribution of income as somehow given are not being honest. We can debate the merits of a policy, but there is no policy-free option out there.

This may be discomforting to people who want to believe that we
have a set of market outcomes that we can fall back upon, but this is the
real world. If we want to be serious, we have to get used to it.

austerity22No one ought to doubt that the idea that capitalism is an expression of impartial market forces of supply and demand, bears but little resemblance to actual reality. Wealth and income distribution, both individual and functional, in a market society is to an overwhelmingly high degree influenced by institutionalized political and economic norms and power relations, things that have relatively little to do with marginal productivity in complete and profit-maximizing competitive market models.


  1. “Capitalism builds on the idea that everyone can be richer than all the others” (Tage Danielsson)

  2. We can debate the merits of a policy, but there is no policy-free option out there.

    I absolutely agree with this assertion that there is no policy null, no situation where the best rule can be no rule. But, let us also recognize that a common and often politically successful rhetorical strategy is to argue for the null of “freedom”. And, the purpose of such rhetoric is to avoid or derail a debate on the merits of public policy. It is a powerful pose rhetorically, because it obligates the advocate to defend no positive program, while leaving a great range of negative complaints available for selective use to tactical advantage.
    We need an economics that is more cognizant that the actual economy is largely organized not by mythical “markets” and competitive-market-prices, but by rules and bureaucratic administration shaped by financial flows and contingency. And a style and strategy of political rhetoric less vulnerable to neoliberal subversion and seduction.

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