I am glad to hear that Gil Skillman thinks that the static efficiency
properties of markets are the "least important" features that recommend
them. In other words, Gil is conceding that markets generate reasonably
accurate estimates of social benefits and costs of different goods and
services -- or certainly would fail to do so if the labor market were
mucked with so as to generate reasonably equitable wages. I would appreciate
if Gil would explain the rationale for this concession to his fellow market
enthusiasts. I think he rightly concedes a point that cannot be defended.
But I do not sense that many who champion a market version of socialism
understand the necessity of this concession. I'm not even sure Gil could
get a majority of market enthusiasts to condone his running up the surrender
flag regarding the static inefficiency that would result in a market economy
with fair wages.
Regarding Gil's substantive points:
1) I don't know what restricting the capital market has to do with anything.
If you want to restrict the capital market as well as the labor market, fine
with me since that leaves us an economy with n-2 markets instead of n-1.
Since I still believe a desirable economy has zero markets in the limit,
eliminate them one by one if you have the patience for it. Seriously, I
did not understand this point.
2) As to whether or not markets provide the best possible information and
incentives to decision makers -- and are efficient on those grounds; and as
to whether the new game theoretic and information oriented economics that is
replacing the old neoclassical efficiency analysis teaches us the true
virtues of markets:
Isn't it convenient that the new game-theoretic information oriented micro
theory came along just when the old venerable defense for markets on grounds
of pareto optimality was finally crumbling. Stupid me for having rooted on
game theory and information economics! Guess I should have known better.
Fortunately for game-theory and information economics, I don't think they
exonerate market inefficiency at all -- but that is a long story I don't
want to go into here except to say that free rider problems and biases
inherent in what preferences can be most easly expressed and what ones
cannot in market systems abound, and that the new information economics
should help bring these problems to light -- not bury them.
The fact that the Soviet economy suffered more from lack of motivation
and incentive problems than from static inefficiencies in resource allocation
is 1) a position I have been arguing since 1981 (Socialism Today and Tomorrow,
1981, and Chapter 9 of Quiet Revolution in Welfare Economics, 1990) so I
am not going to disagree; but 2) hardly proof that markets are the most
efficient systems of motivating socially useful efforts and innovations.
Apes look good compared to dinosaurs, but Gil -- wait till you see a
human!
While static efficiency was my initial concern in designing and defending
a participatory economy as a more equitable but no less efficient alternative
to market economies -- since that was the traditional critique of any non-
market based system for resource allocation -- I have more recently examined
objections to participatory economies on motivational, incentive, and innova-
tion grounds. I will send Gil, and any others interested a copy. Within
a month the Left Bulletin Board System, LBBS, will be accessible from the
internet along with its library of articles. The article titled "Why Partic-
ipatory Economics?" in the June issue of Z Papers is in the LBBS library
and can be down loaded by any interested once LBBS is on the Internet.
In Solidarity, and Hasta la Victoria Siempre
