Sunday, February 28, 2010

A Common Misunderstanding of Free Markets

It is not the FREEDOM of markets that is beneficial to an economy, but rather the existence of sufficient COMPETITION to ensure that market outcomes are a reasonable balance of efficiency and fairness. Markets sometimes need to be regulated to prevent the concentration of market power.

Much of the recent struggles in financial markets could have been prevented by not allowing banks and similar institutions to become “too big to fail.”

Ideological devotion to free markets, such as seems to be currently popular in the guise of patriotism, illustrates a fundamental lack of understanding of most great economic thinkers since the 18th century.