Occupy market failure
from David Ruccio
With all due respect to Mark Thoma, the introduction of market failures does not mean the teaching of principles of economics is not a problem.* It’s the least mainstream economists can due. But it’s not enough.
The way principles of economics gets taught, at Harvard and at many other schools, is that markets represent the best solution to the problem of scarcity (based on limited means and unlimited desires). But then, after the entire apparatus has been explained, it can be shown that—for a variety of reasons (from negative externalities, such as pollution, to asymmetric information, as one might find in credit markets)—free, unregulated markets might not produce an efficient allocation of resources. A market failure might occur. Therefore, some kind of intervention might be necessary.
That’s it. In the best of circumstances, that’s the end of the story. And so the limits of the mainstream debate are defined: free markets versus regulated markets, the invisible hand and the visible hand. All with the same goal: the efficient allocation of scarce resources.
But that’s not enough for our students. What the market/market failure way of teaching the principles of economics doesn’t allow is that there are other ways of making sense of markets—other economic theories, historically and today—and other ways of allocating goods and services and resources—other economic systems, which may or may not include different kinds of markets.
The principles of economics needs to introduce students to those debates, among and between different theories and different economic systems. That’s why we need to occupy market failure.
* But I do agree wholeheartedly with Thoma on his earlier observation:
The fact that one introductory class at Harvard has this much power to affect the national narrative is part of the problem not the solution. It is yet another reminder of just how concentrated power is in this society, and where it lies. Would a protest at a typical state university have gotten as much publicity? Nope. But when it’s the institution that educates the rich and powerful, suddenly we are supposed to take note. And we do.