I see it as an unstable economic model; it will either devolve to capitalism with monopolies capturing most if not all sectors; or devolve into communism with a single state-like entity controlling everything. At which point; no matter which way it went; it will collapse under its own weight.
The way it swings will depend on the people who are there at the start.
The modern version of libertarianism that we see most of; is based off some really bad assumptions:
(1) the market is perfect
(2) barriers to entry are irrelevant
(3) monopoly is not bad
(4) humans are rational actors
(5) if the market can’t address the issue, it is irrelevant
(1) The market is perfect:
This leads to the assumption that all regulation is bad; and that it merely works to reduce personal freedoms and the ability of the market to produce things in the most efficient way possible.
It completely ignores history and the reason regulatory bodies were created. It also ignores that the market is not a thing unto itself; but is composed of people (see 4).
(2) Barriers to entry are irrelevant:
This follows directly from (1); even the simplest business has some barrier to entry. You have to buy somethings that your business needs to run. These are real costs, and will provide a barrier. Obviously, the bigger the barrier then more entrenched players have an advantage (see 3)
(3) Monopoly is not bad:
This is a subtle acknowledgment that (1 & 2) are completely false. Basically it is a cope, that even if monopolies form; clearly this is the market producing the most efficient production framework.
This ignores history; the major monopolies that were broken up. The crazy shit that went on to protect their monopoly status.
(4) Humans are rational actors:
Most economic models assume that consumers will make rational choices; they will make the most economically rational choices. Libertarians (in my experience) love this.
This ignores so much of reality; it also assumes that the values of all are the same as their own.
There is really too much in this point to cover here. So many things that we actually do make no sense if you were a rational actor, such as brand loyalty.
(5) If the market can’t address the issue, it is irrelevant:
There are many things that the market cannot address; but in the libertarian model these things are ignored.
e.g. fire fighting; this is the classic example where a market solution didn’t work.
But equally; policing; education; major infrastructure; functional health systems. There are so many examples; where if left to a purely market solution, simply would not get done.
Crikey, very well-written and well-reasoned! I would just add:
(4)(b) Human have perfect information about the world.
In order to make rational choices, producers and consumers need perfect information. This also ignores so much of reality. Again, there are so many examples, but even in a simplified model transaction of buying a loaf of bread includes so many variables that it would be impossible to know them all: All of the bakeries offering bread, the prices they ask for their loaves, the sensory quality of the bread, the nutritional quality, the bakeries’ food safety standards, and so on. Imagine trying to investigate the food safety record for the producer of each item in your typical grocery cart—an impossibility.
I see it as an unstable economic model; it will either devolve to capitalism with monopolies capturing most if not all sectors; or devolve into communism with a single state-like entity controlling everything. At which point; no matter which way it went; it will collapse under its own weight.
The way it swings will depend on the people who are there at the start.
The modern version of libertarianism that we see most of; is based off some really bad assumptions:
(1) The market is perfect:
This leads to the assumption that all regulation is bad; and that it merely works to reduce personal freedoms and the ability of the market to produce things in the most efficient way possible.
It completely ignores history and the reason regulatory bodies were created. It also ignores that the market is not a thing unto itself; but is composed of people (see 4).
(2) Barriers to entry are irrelevant:
This follows directly from (1); even the simplest business has some barrier to entry. You have to buy somethings that your business needs to run. These are real costs, and will provide a barrier. Obviously, the bigger the barrier then more entrenched players have an advantage (see 3)
(3) Monopoly is not bad:
This is a subtle acknowledgment that (1 & 2) are completely false. Basically it is a cope, that even if monopolies form; clearly this is the market producing the most efficient production framework.
This ignores history; the major monopolies that were broken up. The crazy shit that went on to protect their monopoly status.
(4) Humans are rational actors:
Most economic models assume that consumers will make rational choices; they will make the most economically rational choices. Libertarians (in my experience) love this.
This ignores so much of reality; it also assumes that the values of all are the same as their own.
There is really too much in this point to cover here. So many things that we actually do make no sense if you were a rational actor, such as brand loyalty.
(5) If the market can’t address the issue, it is irrelevant:
There are many things that the market cannot address; but in the libertarian model these things are ignored.
e.g. fire fighting; this is the classic example where a market solution didn’t work.
But equally; policing; education; major infrastructure; functional health systems. There are so many examples; where if left to a purely market solution, simply would not get done.
Crikey, very well-written and well-reasoned! I would just add:
(4)(b) Human have perfect information about the world.
In order to make rational choices, producers and consumers need perfect information. This also ignores so much of reality. Again, there are so many examples, but even in a simplified model transaction of buying a loaf of bread includes so many variables that it would be impossible to know them all: All of the bakeries offering bread, the prices they ask for their loaves, the sensory quality of the bread, the nutritional quality, the bakeries’ food safety standards, and so on. Imagine trying to investigate the food safety record for the producer of each item in your typical grocery cart—an impossibility.
Thanks.
4 was such a big one; I knew I couldn’t do it justice in a shortish post. But it is a fundamental assumption that is very wrong.
You are correct; information asymmetry is one big driver of people making “non-rational” choices.