Tagged: Markets

What are markets? Political and philosophical reflections.

The market mechanism, taught to millions of business and economics students, is not a simple model. Even though it has been studied extensively, the political discussion about the role and applicability of markets often seems confused. A deep fact/value problem distorts the debates about markets and democracy as the cornerstones of Western societies. Is the market mechanism a normative model, a necessary ingredient of efficient economic systems, or does it only refer to a set of scientific laws that describe how a society’s economic activity organizes itself? The following points are food for discussion; I am not advocating a particular economic philosophy. I have already...

Market Mechanism Explained

It seems to be fairly simple, but it raises many questions. To start with: Did Adam Smith describe a law of economics akin to a natural law, or is the market mechanism only a model or idealization that describes an optimal way to produce and distribute goods and services? When economists refer to price in a market, they try to keep considerations of fairness and justice out of the picture and, analyze price simply as an outcome of the forces of supply and demand. But what are these forces and what determines them? The following points describe the mechanism, a...

Milton Friedman: Stockholder Theory.

The Social Responsibility of Business is to Increase its Profits Article by Milton Friedman (Quoted from: The New York Times Magazine, September 13, 1970.) When I hear businessmen speak eloquently about the “social responsibilities of business in a free-enterprise system,” I am reminded of the wonderful line about the Frenchman who discovered at the age of 70 that he had been speaking prose all his life. The businessmen believe that they are defending free enterprise when they declaim that business is not concerned “merely” with profit but also with promoting desirable “social” ends; that business has a “social conscience” and takes...