http://mises.org/story/2289
Ch 3
This is actually a response to a response to a movie. The movie is Groundhog Day, and the person whose response I’m writing a response to explains how the movie supports his view that market imperfections or failures do not necessarily warrant government intervention.
The movie itself is about a man, Phil Connors, who lives one day (specifically, Groundhog Day) loads of times. The first time he goes through it, he makes mistakes left and right. Little does Phil know that when he goes to sleep that night, time would rewind by a day, letting him relive it again… and again… and again. After about a few hundred do-overs, he is finally able to live Groundhog Day to complete perfection for everyone involved in his day. How does Phil do it? By accumulating more and more information until at last, he knows everything he needs to know in order to make the day perfect.
The person reviewing the movie compares the main character’s experience with a market. Phil’s ability to live Groundhog Day perfectly at the end is similar to how the government goes about stabilizing the economy (Chapter 3’s focus). This could make sense, except for the fact that Phil’s result of a perfect day was completely dependent on one factor: every single repeated day was identical to the one before it. The weather, traffic conditions, and even the people repeated themselves flawlessly. No change at all. In short, Every Day was the First Day.
Government intervention is based on information collected and its actions are based on the ideal of perfect market equilibrium. This is obviously impossible. Nevertheless, this is the yardstick that the capitalist system is often measured up against when economists judge it. Because change is constantly shifting the equilibrium, however, that creates “market failures/imperfections” that call for government involvement.
The movie reviewer’s opinion is that basically a free-market system allows for more coordination between suppliers and consumers, and supply has a better chance of matching demand. He admits that a free-market system, while flexible and efficient, is not perfect, but government regulations and price controls are more likely to increase disorder and confusion in a market. He proposes that we toss the ideal of “perfect market equilibrium” and just let the free-market system do its thing.
Personally, I think that the market imperfections in our system – information and competition – have been reduced by government intervention. Consumers are able to see how nutritious their food is, and new companies have a fairer chance of making it in the industry. I agree with the article, that continuous change in the market wrecks whatever information government intervention is based on and makes it less effective. But, you can’t deny the benefits that government involvement gives us. Knowledge about the food we’re buying, and equal opportunities for competition are both things that many consumers and company owners value.
Ch 3
This is actually a response to a response to a movie. The movie is Groundhog Day, and the person whose response I’m writing a response to explains how the movie supports his view that market imperfections or failures do not necessarily warrant government intervention.
The movie itself is about a man, Phil Connors, who lives one day (specifically, Groundhog Day) loads of times. The first time he goes through it, he makes mistakes left and right. Little does Phil know that when he goes to sleep that night, time would rewind by a day, letting him relive it again… and again… and again. After about a few hundred do-overs, he is finally able to live Groundhog Day to complete perfection for everyone involved in his day. How does Phil do it? By accumulating more and more information until at last, he knows everything he needs to know in order to make the day perfect.
The person reviewing the movie compares the main character’s experience with a market. Phil’s ability to live Groundhog Day perfectly at the end is similar to how the government goes about stabilizing the economy (Chapter 3’s focus). This could make sense, except for the fact that Phil’s result of a perfect day was completely dependent on one factor: every single repeated day was identical to the one before it. The weather, traffic conditions, and even the people repeated themselves flawlessly. No change at all. In short, Every Day was the First Day.
Government intervention is based on information collected and its actions are based on the ideal of perfect market equilibrium. This is obviously impossible. Nevertheless, this is the yardstick that the capitalist system is often measured up against when economists judge it. Because change is constantly shifting the equilibrium, however, that creates “market failures/imperfections” that call for government involvement.
The movie reviewer’s opinion is that basically a free-market system allows for more coordination between suppliers and consumers, and supply has a better chance of matching demand. He admits that a free-market system, while flexible and efficient, is not perfect, but government regulations and price controls are more likely to increase disorder and confusion in a market. He proposes that we toss the ideal of “perfect market equilibrium” and just let the free-market system do its thing.
Personally, I think that the market imperfections in our system – information and competition – have been reduced by government intervention. Consumers are able to see how nutritious their food is, and new companies have a fairer chance of making it in the industry. I agree with the article, that continuous change in the market wrecks whatever information government intervention is based on and makes it less effective. But, you can’t deny the benefits that government involvement gives us. Knowledge about the food we’re buying, and equal opportunities for competition are both things that many consumers and company owners value.
posted by Grace at
5:06 PM
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