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Oct 26 2011

Whither the Government in a Market Economy

That Republicans have scuttled President Obama’s proposed jobs bill is no surprise.  Their obsessive compulsive adherence to an “expansionary fiscal austerity” philosophy, debunked by recent scholarship, along with their summary dismissal of the Congressional Budget Office analysis that estimates the bill would create about two million jobs if passed, is par for the proverbial course.  Their goal, of course, is not simply, nor primarily, to change the way fiscal and monetary policies are used for general economic stabilization purposes.  Their ultimate goal is to change fundamentally the role of government in a market-based economy by ridding private markets of any government involvement or interference, unleashing fully the power of self-interest and Adam Smith’s invisible hand to guide the nation’s resources to their most productive and valuable uses.  Witness the extreme right’s attacks on health care reform,  financial market regulation, climate change policies, and the Environmental Protection Agency, to name a few. 

Now, lest anyone get the wrong impression of me, please understand that I am first and foremost a market economist.  I believe in markets driven by the pursuit of self-interest and I marvel at the efficiencies with which they operate.  Just think about the fact that you can go into a grocery store at any time of day and find whatever you might want at a price you can usually afford.  Next time you’re in a Starbuck’s enjoying a cappuccino or latté or espresso, think about the myriad of transactions that had to take place to bring that drink to you in that place at that time.  Little or no government involvement, no central planning required—just price signals providing the proper incentives to businesses and consumers.  It really is astounding and each and every semester I implore my economics students to appreciate how amazing the mechanism is.  So the bottom line here is that you’re not reading the rants of a Marxist or radical.

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0 comments - Posted by Ernest Zampelli at 3:20 PM - Categories: Economy