On Dec 7, 2007 5:39 PM, David B. Shemano <[EMAIL PROTECTED]> wrote: > Back to the present. I previously referenced the examples of selling your > car and voting for mayor. You had no problem agreeing that the two > activities were analytically distinct, that one could reasonably be called a > market process while the other was political. You may think my example was > simplistic and easy, but the point is that you acknowledge these categories > are analytically distinct. We can think of hard cases, but so what, they are > hard cases. >
Sure I agree it is possible to distinguish between politics and markets in a coherent way. The important point is that this libertarian analysis (just like a Marxist analysis) is an approximation. Any conclusions you may draw from it should be tempered with the recognition that it is an approximation of reality. In some situations it may be a good approximation and in others it may be a very bad approximation. For example I am sure the libertarian analysis works very well in understanding how many auctions on ebay work. All of this I hope we can agree with. On the other hand moral hazard is a situation where the libertarian analysis is a very bad approximation. Why? Because moral hazard arises precisely because of the linkages between politics and markets. Therefore an analysis which gives primacy to these linkages is likely to lead to much better insights than an analysis that considers markets and politics to be analytically separate processes and considers linkages as perturbations of this norm. You acknowledge these perturbations can be quite strong so why not be flexible about your analytical framework? It is kind of like how physicists can use 3 different theories of light - the ray theory for lenses, the wave theory for diffraction and the particle theory for photodiodes. All three are quite valid but when applied out of its proper domain they can lead to poor approximations or even wrong conclusions. -raghu.
