Right Wingers and Libertarians Ignore Information Problems in Markets

I've been very encouraged in the last week while preparing for lectures on fiscal policy, remembering exactly why I don't subscribe to libertarian theories regarding the economy.  Put simply, there are certain conditions under which markets deliver efficient results, and often they fail.  Libertarians tend to completely ignore issues of information in particular, which usually result in the price mechanism, the mechanism by which the market can deliver the most efficient outcome, failing to work properly.

As a result those Christians that lean towards a libertarian view on things ignore characteristics of markets that make outcomes anything but efficient, and usually much worse for those without any power in the market situation.  That, for me, cannot be a Christian stance to take.  This is regardless of even whether you add into the equation any ideas of social justice which libertarians after Hayek appear to dismiss as pseudo-religious nonsense.

So what are these conditions under which markets produce efficient outcomes?  They are:

1. Perfect competition.  Many firms in the market, all of whom are price-takers.
2. Complete markets.  All markets exist for goods which consumers are willing to pay a price above production costs for.
3. Perfect information.  Consumers are well informed about price, quantity and the future.
4. No market failures.  No public goods, no externalities, and no increasing returns to scale.

The one that fails most is number 3, perfect information.  Healthcare is perhaps the prime example.  On information, it is generally the case that the market will work well when:

• Information can be cheaply provided if lacking (e.g. PC Magazines).
• Information can be easily understood (e.g. on food preparation).
• Costs of mistakes are small (e.g. buying a drink that doesn't taste good).
• Consumer tastes more diverse (e.g. food).

So thinking about, for example, healthcare, information might be cheaply provided, but it's not easy to understand by any stretch of the imagination.  Certainly the costs of mistakes can be very big indeed (choosing the wrong surgeon could result in death), and consumer tastes aren't all that diverse (good health!).  On the other hand, there isn't a National Food Service because information is easy to provide and understand, and while food poisoning can be nasty it isn't fatal (and food health regulations help here in creating minimum standards), while tastes are very diverse and so a National service would struggle to cope with that and leave us with bland results.

The essential point is this: There are many grounds on which governments should intervene in the interests of efficiency in market outcomes before one even starts to think about social justice.  Those that argue for cutting back the state and letting the market do things forget about (2) and (4) above which mean that the market will generally underprovide things for which the social value is greater than the private value, and overprovide those where the social value is lower (externalities), meaning the Big Society will fail to provide libraries, schools, hospitals and even redistribution on the level an efficient market requires.  That's even before we think about social justice.

In short, a right winger believing in the Big Society is proposing a system that underprovides essential functions of a society at an efficient (and humane) level because they have not considered the economics of the matter.  Similarly a libertarian who is also Christian, again by ignoring the economic theory, is arguing for something that will underprovide for the needs of the least fortunate in society.

Well done Rowan Williams

There's much to get angry about in what people say regarding the Church and its stance on Homosexual marriage, but it's really good to hear the Archbishop of Canterbury sticking his ground and not giving in to the liberal elements of the church and of society.  A Tory MP apparently arranged a meeting at which Rowan Williams made a public statement about his being against churches being used for homosexual marriages.  His statement is still somewhat contradictory in that he says it's ok for clergy to enter into homosexual relationships (not Biblical), while at the same time saying the Bible dictates marriage is between a man and a woman, but hey ho.  He has a difficult job to balance the liberal and conservative elements of the church.

Other than that, it's actually a really good statement.  It's not homophobic to say this - Christians should not be hating homosexuals, simply being aware that it, along with everyday things that everybody engages in (hateful thoughts and speech etc), is a sin.

I found the comments of Simon Kirby pretty frustrating.  Yes, it's not in line with public opinion to say things like this, but since when was the church trying to stay within public opinion?  The church has the Bible on which to form its worldview, and isn't thus trying to keep up with public opinion.  The church also isn't reliant on attracting people by being "up to date" with public opinion, that's not what the church does!  The Church should be faithful to the Bible, God's revelation, in society, and hence by being the church it will stick out and look different - otherwise if it doesn't, what's to leave the church any different to some kind of social club or something?

Why does being a right winger, Christian and being anti-EU go hand in hand?

Yes, it's that man Cranmer again, the one who rather pompously always refers to himself as "His Grace".  He's waffling on about Ireland again, and how their new government is actually powerless in the grand scheme of things, despite trying to sound different.  He says "Gael or Fáil – it doesn’t matter which centre-right(ish) party is in office, their sovereignty has been removed: they have no power.".  But the point really is: Does "His Grace" realise we live in a fallen and inter-connected world economy?  Does he think that if Ireland had never joined the Eurozone or EU, they'd have more power?!

They would still be a small open economy, reliant on others to trade with them, and reliant on the interest rate decisions of larger neighbours due to running a flexible exchange rate and not having capital controls.  They'd have been in as much trouble in or out of the Eurozone, as their bankers would still have run riot in just the same manner - given the Financial Crisis was a pretty global thing, even "His Grace" can't pin that one on the EU.

So even had they not had the bail out, they would still have been crippled by the behaviour of their bankers, had their government done what others done, and bailed out the banks, because instead of having the current repayments, they would have much higher interest rates on any debt they wanted to take out.  And austerity, now a global by-word for economic illiteracy, is everywhere and hence even had Ireland not needed to, they would have been forced into it, in or out of the Eurozone.

I'm sure someone will say: But they could have devalued if they weren't in the Euro.  Sure.  Because the depreciation (that's the word these people are really looking for in this age of floating currencies) has really helped the UK, hasn't it?  Our manufacturing is really leading us in an export-led recovery, and we're loving how expensive all our imported goods are, aren't we?

So even were Ireland not reliant on the Eurozone/IMF after the bail out, they sure as anything wouldn't have had any more power than they currently do.  It's just not quite how a fallen (second best) world works.  But that kind of thing distorts the rabid anti-EU sentiment of many right wingers.  Why let the truth get in the way of a good story?

 

Hmm, He wasn't a left winger either

I wince when I read leftie commentaries like this one on Labour Uncut.  It's essentially a rant against faith schools, suggesting they produce extremists and help produce ghettos.  Now I grew up in North-East Manchester in the late 1990s, and it certainly didn't need faith schools there to create the ghettos that existed back then and still do.  The simple fact is that in particular areas the majority of kids that go to a school will be from a particular ethnic group.  Whether or not that school is a faith school, it will be filled with kids from particular ethnic backgrounds, and if you throw in some state propaganda via a secular school that will probably if anything have an adverse effect on kids, leading to them rejecting the system.  Many kids that grow up in Christian schools tend to reject Christianity, so perhaps actually, faith schools might not be a bad idea to enable kids to reject radical variants of Islam.

It would appear Marchant thinks it's actually possible to have a school that doesn't promote a particular faith, forgetting that if you remove the Christian worldview from a school, you must replace it with something else, and that something else will be an athiest worldview, the kind that presents evolution as the facts about how we all got to be here, instead of the theory that it is.

Anyhow, minor rant over.  I'm ashamed of left wingers when I read stuff like this.  Jesus would have been in the centre...

Right winger first, Christian second

I'm not sure why I do it, maybe it's some kind of sad thing where I need something to provoke me. Either way, I persistently check in Google Reader the feed from the Cranmer blog.

Everything I read there confirms to me more and more (it may be obvious to others but forgive me my denseness as I catch up!) that this chap is a Conservative first (and hence belonging firmly to the right), and then a Christian second - and I think a distant second at times. He makes persistent disparaging remarks about people on the left, despite from time to time noting how his hero Margaret Thatcher (I would have thought an Archbishop's hero ought to be Jesus but that's by the by) never claimed you had to be right wing if you were a Bible-believing Christian.

In his most recent flare up, he has taken on some rather outspoken chap called Mehdi Hasan. Cranmer describes Hasan as being pretty childish, throwing toys out of the pram. This kind of patronising attitude is all over Cranmer's blog, and really irritating and off-putting. No wonder people look at Christians who attach themselves to the Conservative party and are put off.

However, in Cranmer's original description of why he disagrees with Hasan, Cranmer contains not a single bit of evidence to support his assertions. It's a bit like reading the Daily Mail. Cranmer attacks Hasan about things that supposedly are self-evident, uses emotive language, but doesn't provide a single shred of evidence. It's the kind of stuff that convinces those already convinced about the prevalence of these supposed problems.

And of course, the bottom line is that Cranmer is against multiculturalism, something he blames Labour squarely for, as if it's something that only started happening in 1997. Multiculturalism is something for the left, it seems. Not fo right wingers in the days of Cameron preaching illiberalism on the same day the EDL marches through Luton.

The fascinating thing for me is this. Cranmer is fiercely opposed to a number of things that people from different cultures do, because they are an anathema to him, rightly or wrongly. He agitates that they must not be allowed to do them in a country as wonderful as ours (since when was a Christian supposed to be ever so tied to the things of this world and proud about them, exactly?). So we should be telling these people the bloody well do what we do, or else.

Yet at the same time, he argues for freedom of religious expression, particularly on the part of Christians. Now I happen to believe this should be allowed. But my point is this: If we have freedom of religious expression for Christians to do things that are increasingly counter-cultural (e.g. say homosexuality and sex out of marriage is a sin), then we have to allow others to be able to do counter-cultural things.

I just don't get the difference, and it really irritates me about this Cranmer chap. His economic illiteracy also bugs me, but I'll have to write about that elsewhere since this isn't a blog about economics...