The Pathology of the Market

"The belief in markets is a religious belief.  Rationally, we know of all kinds of fundamental, what are called, 'inefficiencies' in markets.  But the belief that they can solve everything and that everything can have a value determined by the market, I think you can regard that as a religious belief.  The other day I happened to be reading a careful, interesting account of the state of British higher education.  The government is a kind of market-oriented government and they came out with an official paper, a 'White Paper' saying that it is not the responsibility of the state to support any institution that can't survive in the market.  So, if Oxford is teaching philosophy, the arts, Greek history, medieval history, and so on, and they can't sell it on the market, why should they be supported?  Because life consists only of what you can sell in the market and get back, nothing else.  That is a real pathology. . . .

" . . .. the beliefs are nuanced.  The advocates of markets typically don't want them for themselves, they want them for others.  Let's say you are the CEO of J. P. Morgan Chase and you may advocate markets, for others, but you don't want them for yourself.  You want the government insurance policy that enables you to survive.  And as soon as you get in trouble, you run, cap in hand, to the taxpayer and say, 'save me.'  In fact, the bailouts are the least of it."

"There is a recent IMF study that tries to estimate where the profits of the big banks come from, and they conclude that they come almost entirely from the government insurance policy, not the bailouts, but the access to cheap credit, the higher credit-ratings because the agencies know you are going to be saved, and the chance to take risky and highly profitable transactions because you are not in danger if it breaks down.  And, of course, what is called 'systemic risk,' the impact on others, isn't part of a market interaction, which is - suppose you sell me a car.  In a market structure you are supposed to ask what is the best deal for you and I am supposed to ask what is the best deal for me.  We are not supposed to ask  what is the best deal for him [someone outside the immediate transaction], but there is an effect on him: there is another car on the road; there is more pollution; there are more traffic accidents, and that multiplies over the society.  It can end up being a huge cost.  Those are called externalities.

"If the externalities are internalized, that is, if we had to pay for those consequences, probably only the super rich could ever drive a car.  And there is no way to estimate those consequences.  It would be an impossible calculation.  How do you figure out what the cost is of the fact that five years from now he will have an accident, or get lung cancer or something?  There is no possible way to do it.

"There are what people call 'libertarian economists' (a strange notion) who think you can calculate all of these things and life could be run by some sort of huge computer that makes every action you carry out a market transaction.  Gary Becker, of the University of Chicago, a Nobel Laureate, received a Nobel Prize for things like this.  Marriage, he argued, is an economic transaction.  You measure the quality of the person, the possible gain you will get from being with that person, the loss that will come along because of conflicts, and somehow out of that estimate you decide to get married.  It is literally pathological.

"There are economists of that nature who argue against the existence of roads because why should I pay for a road in the other part of town that I am never going to use.  That undercuts my liberty, my freedom.  So, if you believe in freedom you are against that.  Well, then, how do you get roads?  If I want to drive from my house to MIT, I build a road.  Then comes the question:  "How do I keep other people from using it?'  Easy, I hire an army.  Suppose they hire a bigger army.  I hire a still bigger army.  That way we are all free.  It is as if some fiction writer imagined a concept of hell, it would be a market society."

-----Noam Chomsky, excerpted from "The Most Dangerous Belief," Z Magazine, January 2014