Market Outcomes & Opinions
I get a significant number of questions about markets and market interventions when I am on the radio. Part of this is due to the economic circumstances in North Dakota where significant growth is creating social tensions and frictions. Another key ingredient is the financial resources available to the state. Tax collections continue to do well, feeding the interventionist tendencies of politicians and policy makers.
There are many targets for these meddling feelings but for the most part it boils down to a desire to somehow change the market outcome. Many would tell me they want to “improve” the market outcome, which is simply an attempt at justification for those interventionist tendencies.
These people seem to forget that markets have nothing to do with fairness and the equity of outcomes. Markets are the mechanism whereby we assure as efficient an allocation of resources as possible. A virtue of considering efficiency as a standard is that efficiency can be defined in very objective terms, such a currency unit or some other resource measurement. Contrast this with some attempt to measure outrage, indignation, or dissatisfaction with a situation that is not “fair.”
Now I will not go so far as to guarantee it, but it seems very likely that in many market outcomes someone will feel slighted, that the market outcome is not “right.” So as we tinker with these outcomes to improve factors such as “fairness” we probably reduce efficiency. So we might achieve an outcome that makes us feel better about being alive, but we wasted resources.
I recognize that economics and efficiency are not the only two criteria by which we evaluate policies. I also admit that is probably a good thing. That does not mean we should dismiss them lightly. Whether we are talking about older Americans and housing prices, low income Americans and minimum wages, we need to keep in mind that changes to the market outcomes will have consequences, for those that are targets of policies and others.
“Fair” is a four letter word, and it means many different things to people. The inherent subjectivity of such a standard makes policy evaluation a moot point. When there is no objective criteria for discussion and decision policies might as well be decided base on the type of font used to print up the text.