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Milton Friedman: "Perfect Market"

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PostPosted: Mon Jan 29, 2007 3:40 am    Post subject: Milton Friedman: "Perfect Market" Reply with quote

Perfect Market was brought to my attention by the late Milton Friedman

Some folks who make money peddling Milton Friedman's work have declared Jan 29th to be "Milton Friedman Day". Friedman, who died late in 2006, is the economist most loved by Neoconservatives and Capitalists for promoting the concept of the "free market" as an antidote for everything from dictatorship to herpes.

Now, most people like making money, and most people like helping their fellow man. Which one is most important to you? Your answer will likely determine whether you agree with Friedman's Free Market views or not. His is an an emotional position, not a testable (or even detestable) scientific theory. His writing on this topic, however well done, is just rationalization for the viewpoint he started with.

However Friedman sometimes mentioned one idea which which pops whole balloon of free market wonderfulness: the "Perfect Market". The definition from

"Along with the concept of a free market is the concept of a perfect market. To have a "perfect market" specific market conditions must be present, generally referred to as: "perfect competition" in where no buyer or seller can unilaterally influence the price; "perfect knowledge" in where all buyers and sellers have the same information; and "perfect mobility" in where all buyers and sellers can move to where they have the greatest competitive advantage."

But look at some situations where "free market economics" is used as justification for the status quo; and consider the flaws in the "Perfect Market" that should be there:


PM Flaw:


Price of Oil

Price Influence

Big Oil crushes alternative fuels (consumers can't move to conpetition).
Government subsidizes Oil Companies via oil wars and tax breaks.
Small cartel sets prices at will. Proof: All gas prices mysteriously go down before the '06 election.

Outsourcing jobs


So displaced American workers should move to India or China?

Cost of medications

Price Influence

You have cancer or AIDs, and withtout a patented drug you will die. You can't negotiate, you can't go to the competition.

No-Bid Contracts a la Haliburton


Wait a minute, that's not even remotely "free market". How did Neocons get behind that?

That's not to say free market economics is not a useful concept - It is - but since the days of Reaganomics it's been badly overused and abused.

So try this simple test for yourself - the next time you hear a conservative say "free market", consider the market in question and see if you can spot the flaws that make it an imperfect market. If you can't see them right away, ask a liberal friend for help. Heck, post it here and I'll help look for the market flaws. I've been doing this since reading a Friedman obituary a few months ago, and so far the markets are imperfect 100% of the time.

If you're a Neocon this exercise will give you that pain in the head that progressives call "cognitive dissonance", but if you're progressive it will be fun!

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