The Market’s Not Perfect, But it Does Work

God I hate it when I agree with the Friedman types.

Actually, I’m not the socialist that I’ve been accused of being time and time again.  I believe in the market, I just don’t think it should be totally free.  Nor am I master of free market principles, but I have a vague understanding of them, and know that in some instances they work, and in others they either don’t work, or they don’t work fast enough.

To this degree, I have to fully back Daniel Howes assessment on fuel economy, and the shifting of the market towards more fuel economic cars and how the price of gas effects them.  I then have to back off when he implies that government should stay out of business’s way.

It’s pretty simple, gas prices have gone up, and therefore, people have started buying more fuel efficient vehicles.  The point?  Maybe we should stop working so hard on dropping the price of gas.

It’s not a popular thing to suggest, but it’s the right thing to suggest.  After all, rising fuel prices were part of the reason why my behemoth of a pickup hasn’t even been turned over in about six months; it’s just too expensive.  And the higher gas prices go, the more you’re going to see things changing on the market.

Another example is a coworker of mine who explained that he sat down and did the math and determined that in order for it to be economically viable for him to abandon his gas guzzling SUV, gas prices would have to go up to about 8-10 dollars a gallon.  Otherwise, it’s cheaper for him to keep paying at the pump as opposed to taking on a new car payment plus the hit he’ll take on the insurance.

And at 8-10 dollars a gallon, I would foresee a lot of folks walking, taking the bus, and otherwise doing without until the automakers trip all over themselves to put highly fuel efficient vehicles on the market for dirt cheap.

Just a thought anyway.

3 Responses to “The Market’s Not Perfect, But it Does Work”

  1. Mark says:

    Kudos (or insert less corny synonym if you’d like) on your humility by acknowledging you don’t have a complete understanding of free market principles. This is something I don’t see often enough. By comparison, most of us libertarians would do well to acknowledge that we don’t have a full understanding of socialist principles; not that I think socialist principles are ultimately right, just that it’s extremely difficult to argue against something you don’t fully understand without resorting to demagoguery and caricature, which in turn poisons the debate and prevents either side from successfully persuading the other.
    But when an understanding of each side is reached, you can suddenly find market-based solutions to achieving “Progressive” ends, which is one reason why you will find so many “soft libertarians” like Megan McArdle, the Great Tyler Cowen, and others who support a so-called Pigou tax on carbon emissions. Even I, who is a pretty “hard libertarian” think such a tax is a good idea. Actually- even without the concept of a Pigou tax on gas, a lot of libertarians, including a lot of really hard-core libertarians, have been arguing for awhile that the price of gas in the US is artificially low due to our too-cozy relationship with Saudi Arabia, and that these artificially low prices have created their own set of problems.
    That said, I have to take issue with this statement (and forgive me if this comes across as too doctrinaire):
    “[I] know that in some instances they work, and in others they either don’t work, or they don’t work fast enough.”
    The question that I would ask in response is “By whose standards?” Free markets neither “work” nor “don’t work,” but instead allow individuals to set their own priorities based on what is important to them. If you want the free market to achieve a particular result, then the way to do that is to convince people to buy or not buy x.
    The argument for free markets ultimately isn’t so much that they “work” or “don’t work” as it is that they are a necessary component of freedom more generally. See, e.g., my posts on the Supreme Court’s commercial speech doctrine, though I can think of many other examples.

  2. Dynamic says:

    I’ve long felt that our gas prices were artificially deflated, and I’ll be honest – with prices rising, I can’t help but feel that things are simply reflecting the true state of affairs at last.

    As someone who gave up on the automobile years ago – I retain my license for emergencies only – I’ve felt some vindication lately, and I’ve quite enjoyed watching my local bus route fill up as the weeks pass, until now the bus is well over half full nearly every time I’m on it.

  3. KRK says:

    “Free” market in this context is just a euphemism for “the market rules we have right now.” The U.S. government is nowhere near neutral on energy markets, any more than it is on agriculture and food markets. Energy policies that would shift incentives away from oil toward renewable sources and conservation aren’t interfering with a “free” market, they’re changing the tinkering from one form to another to the detriment of those who benefit from the current setup. Whether that’s a good long-term approach should be discussed widely and openly, without stacking the deck* with arguments that the status quo is a free market and therefore inherently good.

    *meant generally, not referring to the discussion here

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