Sunday, March 10, 2013

Government and the Free Market: Problem Domains

Another post falling out of my argument with Scott Alexander, this one concerns something which requires a little elaboration, and the use of a new term:


Scott Alexander argues my disagreements with him on Coordination are insufficient, so I'm going to elaborate on where I think he's gone wrong.

To use an example, he argues that cod fishermen never created a private solution for overfishing, therefore government had to do it for them.  My counterargument was that they had no means of enforcing any solution they could have produced.  In a sense, I agreed with him.  In another, I disagreed; he argues this is a failure of the free market.

He argues for fish quotas.  I agree with him.  He argues these solutions are necessary because the free market won't solve these problems on its own.  And here I find him absolutely confused.

I used the example of land ownership in my response, and I'll repeat it here:

Suppose we lived in a society in which land couldn't be owned, and you want to start a farm.  However, every time you grow a crop, somebody else comes along and picks and eats it.  How can the free market solve this problem?

...well, supposing a government does in fact exist, it can't.  It would be illegal to punish somebody for picking crops.  How utterly silly of you to even suggest such a thing.

The free market never gets to act on the problem, because the problem isn't part of its domain.  Crop ownership?  What? When somebody picks a fruit, it is theirs, that's the law.  They can pick mushrooms and sell them, they just can't sprinkle mushroom spores around and claim the future produce as their own.  And it would be criminal to sit over a field and bully people who try to pick vegetables and fruit that are theirs as much as they are yours.

That seems utterly silly?  Well, that's the way fishing worked.

The government does have a role, and a serious one, in dealing with the free market: It defines what the domain of the free market is.  It can do this by saying that land can be owned.  It can do this by saying that shares of the fish population can be owned.  They're pretty much the same concept.

The free market can't solve problems the government hasn't defined to be part of the domain of the free market.  (Subjectively, anyways; the black market solves problems all the time.  However, conventional logic is that the solutions to the problems of the black market are themselves problems to be solved from society's perspective.)  It's regarded as criminal and evil and a problem in itself when it does.

So when somebody, like Scott Alexander, tells me the free market didn't solve X problem, and the government hasn't made X problem part of the domain of the free market...

...well, it's just another case of somebody using the fact that the free market doesn't solve all the problems government creates for it as evidence that government solutions are superior to free market solutions.  I've written on this kind of tactic previously, pretty angrily, here: An Irritating Injustice

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