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Tag Archives: free markets

Exceptions Overwhelm Economic Rules

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February 19, 2015
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Intertemporal_Choice

Source: Wikimedia Commons.

by Philip Cohen

There is a lot to be said for the common critique of economists: They see society as the product of freely acting, rationally calculating individuals for whom monetary reward is the primary source of motivation. Free markets, to them, are the pure expression of social function and economic growth through their realization is the only outcome that matters.

But people do not simply act rationally to maximize their economic rewards, because they can have incomplete or inaccurate information, ideological biases, conflicting desires or collective interests. Exploitation, dishonesty, violence, ignorance and demagoguery set vast areas of social life apart outside the model. The multiplying exceptions overwhelm the rule bringing the model’s utility into question.

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Markets, monopolies and innovation

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February 28, 2012
Commentary
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I recently wrote a blog post on The Mythology of Steve Jobs, in which I noted what I take to be a fairly standard understanding among sociologists: that technical innovation is generally the outcome of collective labor and that major innovations are generally produced by well-funded teams of researchers working in places protected from market forces.

The upshot is exactly the opposite of the standard story on innovation we get from mainstream economics. According to the latter, innovations are the result of individual entrepreneurs and are best fostered by intense market competition. But this simply does not fit the history of major innovations. This is shown very clearly in a recent article in the New York Times Magazine by Jon Gertner on the history of Bell Labs.

The article is a bit long, but very insightful and well worth a read. Let me just note a few highlights. Gertner explains that the researchers at Bell Labs were given “years to pursue what they felt was essential. One might see this as impossible in today’s faster, more competitive world.”

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Declining public sector jobs, black workers and the racial gap

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December 5, 2011
Commentary, News Analysis
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A recent New York Times article reports on how the long downturn of the US economy has hit the public sector hard, which, in turn, has been devastating for the black middle class. The article notes that black workers are about one third more likely than whites to be employed in the public sector. Blacks have historically been more able to find work in the public sector, as they faced more discrimination in the private sector. Overall, unemployment rates for blacks have consistently been about twice that for whites, with the black unemployment rate peaking at 16.7% last summer.

The article provides important reporting, but it is unfortunate that it only cites economists and does not address sociological contributions to understanding racial discrimination in labor markets. It notes that economists explain the persistent racial gap in terms of lower educational levels for blacks (the standard human capital refrain), along with continuing discrimination.

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Blood money, inefficiency in “free market” supply chains

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October 25, 2011
Commentary, News Analysis
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A recent article in The Guardian by Lucy Siegle presents some uncomfortable facts about the conditions of production or of many middle-class home comforts. She reports on the human or environmental impacts involved in the production of nine items, from toy packaging to jeans to laptops.

The article presents an informative look into the complex global supply chains that are generally hidden from view when we purchase our products at the Big Box store or on the internet. When reading the article, I was struck by how the reality of global supply chains is often so far from the beneficent free markets found in economics textbooks. The article largely speaks for itself, but let me highlight two disconnections I found particularly egregious with regard to the so-called free market supply chains for mobile phones and coffee.

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