Holy Equilibria

I was reading this sentence from Anatole Kaletsky:

But the market is not always right. It is usually right, but sometimes it is spectacularly wrong – as in the recent sub-prime saga. To acknowledge that governments must sometimes correct market failures is not to reject the economic lessons of the 1980s but rather to apply a proper understanding of economics.

Thinking: to be able to talk about ‘a proper understanding of economics’ after saying that ‘the market’ possesses faculties of judgement, you need to abandon generally understood scientific principles as a basis for appealing to the reader, and appeal instead to the reader’s ability to interpret poetry. Kaletsky then goes on to talk about whether one should ‘trust the market’ in the case of oil. This is rather poetic stuff, and it seems to demand a sort of faith you would more expect to encounter expressed in a priest’s homily than in writing on economics.

Not unexpectedly, he then attributes the fact that we are unable to ‘trust the market’ in the case of oil to the apparent fact of ‘market failure’, manifest in the form of monopoly. But is ‘market failure’ here a case of the oil monopoly failing to produce the desirable outcomes, or a wider failure of the market to bring about competition among sellers of oil? To clarify: is it a failure of this market, or the market?

It appears to me that there are different instances of ‘market’. You have the general concept of ‘the market’, and then you have phenomena which you can identify as specific examples of that market. It may well be that the former is produced as a result of by one’s encounters with the latter. And then, once the general concept is constituted, it may also be that the general concept becomes instrumental in the formation of the specific examples. A comparable process would be where man recognises himself as separate from the rest of nature, and in so doing becomes able to identify a creator who is responsible for man’s existence. Then, once the concept of that creator is fleshed out, so to speak, men begin to comport themselves in conscious imitation of that creator. Whether that creator exists as an object in reality scarcely matters: the point is that the creator becomes the condition for man being able to identify himself as such. And as men evolve, so too does the creator.

I realise I am not getting to the point very quickly here. Basically, I think -and this is probably not an original thought, that in the idea of ‘market failure’ as expressed by Kaletsky -and his is a pretty conventional use of the idea- one can identify one figure of ‘The Market’ analogous to God the Father (the general concept of the market), another analogous to The Son (the specific instance), and possibly even a Holy Spirit figure out there (what brings people to enter into exchange agreements in the first place, rather than simply bludgeoning each other to death in an all-out war for resources).

A quick google reveals that there is already ample material written on this topic. Such as this.

Anyway, I think it’d be hilarious if 1500 years in the future -once the world has been destroyed and reconstituted and only fragments of this civilisation remained- you have some sort of myth on the island of Ireland developing according to which St Patrick introduced the ancient Irish to belief in the free market through the use of the shamrock.

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1 Response to “Holy Equilibria”


  1. 1 Longman Oz July 4, 2008 at 6:53 am

    Heh. For me, believing that that markets (note use of plural!) are “always right” is a misleading truism based on an incomplete understanding of the efficient market hypothesis.

    Markets are only “always right”, if highly efficient. What “highly efficient” means is that everyone possesses all known information relating to the value of the asset in question and are making their selling/buying decisions accordingly. Good luck with achieving that.

    In reality, most markets get (fairly) close to this, but the ideal remains a theoretical abstract. For example, markets, normally driven by greed, often go belly-up, leading to a huge downwards correction in value, e.g. the Dutch tulip market, the Wall Street Crash, the dotcom bubble burst, etc. Because of this, there is a more cynical saying that I like. If you are looking around the market and cannot spot the sucker, then try the mirror.

    Thinking: to be able to talk about ‘a proper understanding of economics’ after saying that ‘the market’ possesses faculties of judgement, you need to abandon generally understood scientific principles as a basis for appealing to the reader, and appeal instead to the reader’s ability to interpret poetry.

    Sounds like a line from Camus re the sub-atomic level!


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