Wednesday, September 24, 2008

What market is good for you?

Market is good. Free market is good. This is what used by some politicians when they are trying to convince American people about their plans. However, classical economics proves that in perfect competition, the market outcome is efficient, not necessarily fair. The problem is: today's market or even the so called free market is not really in perfect competition. In perfect competition, there should be perfect and symmetric information about the market condition and no monopoly power. Today's US economy, asymmetric information is typical and monopoly powers are protected by various laws (in the name of protecting America's competitive advantage.) So, market alone cannot be good in the U.S. and the government has to function well in protecting consumers. So, don't be fooled: perfect competition =\= "Free" market =\= market.

Free market is some time is used synonymously with perfect competition but today's politicians have abused this term and it no longer means perfect competition but a market without government oversight.

This is why: Democrats Are Better Republicans than Republicans Are, copied from Brad Source: Doug Henwood, Liscio Report.

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