Wednesday, February 18, 2009

Analogical Atyaachar

If you follow economic discussions  then sooner or later you are bound to encounter arguments like this, which somewhat parallels the summary of argument presented in I,Pencil, that of spontaneous order. Now I might be wrong but I find the parallel between free market and evolution erroneous.

To summarize the spontaneous order/evolution-free market argument, it goes something like since evolution demonstrates how complex organisms can emerge from simple organism through random mutation and natural selection, free market left to its own devices, can function with the need of a "guiding hand". This comparison is absurd, to say the least. Support for government intervention doesn't rest on government as creator/"designer" of markets, but to the debate, that between free market and interventionist policies which system is more efficient .

And while "theory of evolution" does describe the mechanism where by life on earth has evolved,  it is not a survey of which life form among present life forms is more "fit", restricting itself to the rather tautological statement that only the fittest will survive.

Seen from this point of view both free market and interventionism are two different form of economic systems, with role of government comparable to constituent sub-system of specific life form (some organ for example).

This is not to say that I think that interventionism is a good policy. However my rather low opinion of socialism is due to  living in a socialist country and not due to rigorous economic analysis.
In my opinion the reason socialism fails has to probably do with imperfection of information conduit, and concentration of power .

Whatever the actual reason though, to prove that free market is indeed more efficient than government intervention requires a more detailed argument backed with proofs than this simplistic comparison.

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