"The Real Free Lunch: Markets and Private Property" by Milton Friedman CATO policy report, 1994
On the other hand, please meet Ronald Davis An interview with a Homeless, Please meet Ronald Davis
Back home, Professor Emeritus Perng enlightens the society with thoughts of equality, in a mild leftism tone. I do not intent to match his height, yet would like to offer some alternative perspectives to the current ongoing events back home. I would try, with my best knowledge, to go through all different ideas.
Setups:
Economic decisions are done under constraints; people need to trade; how to trade the things they have in hands are the crucial questions here. Understandings of economic theories are always helpful to build up arguments.
Picture this, people are born on earth. Since the day they visit this planet, they start demand things. They need resources to grow, they need time to grow. To some age, they are expect to contribute(produce), for themselves or for the next generation. They find their places on earth and live accordingly.
However, they live with various constraints. Such constraints start from the very beginning of each life. (In nature, each square meter of soil can only support limited amount plants.) The very first constraint they meet is their endowments. People are born with their endowments(such as gender, look, in what kind of region and what kind of family, etc) and grow up accordingly. To some age, they are expected to live by their labor, yet people can only maximum to work for 24 hours(or say, 16 given sufficient rest). People cannot meet all opportunity sets they might have in life, only some. Constraints are everywhere.
That is where economics start with. Economics, as a discipline, intents to answer particular kinds of questions we all face in life. These questions are all about "economic decisions", regarding to, from first light of the day, what to eat(consume) for breakfast, what to plow(produce) in ground for the food supply in the future (in old times), what to collect more for the winter(save), and what we are going to buy/sell to the next tribe/town (exchange). These are all economic decisions.
I am not going to mention all of them. I mainly focus on exchange, which is a crucial topics here.
A person cannot own everything. The endowment of a person cannot be unlimited, so as the things she/he can produce and accumulate over time. They have to produce, or exchange things with others, to obtain what they cannot have due to the constraints.
Exchanges should taken place in consensus, both parties agree upon things they are going to trade. However, it is not always the case. Exploitation happens often in the course of human history, sometimes by status, sometimes by force, sometimes by deception. Yet, economists aim at keeping all exchanges fair and square. Here comes the debate of various systems. Some say market is the best form of exchange, some say the government should intervene to some degree. There is no conclusive answer here.
We hope, by understanding of human behaviors or economic institution, we could work out theories and practices that make people are free to make their economic decisions, or say, achieve their best interests by being responsible for the consequence of economic decisions.
Possible Solution:
Free market system as an exchange mechanism is one, yet lots of problems in it are still waiting to solve.
Economists, as people who specialize in these studies, are trying to figure out what the best economic decisions would be. People work, earn wage, consume, save and transfer further.
1. These very same people, by all means, should have the rights to keep the fruits of their labors, private ownership is quite a key here.
People tend to think that liberal economics, or people who promote such thoughts, is hands in hands with big enterprises, which exploit resources, labor and capital alike, in an excessive way. On the contrary, these economists do not promote such ideas. They urge to protect whatever a person should have, via the protection of private ownership.
So, when you offer your labor services, liberal economists believe you should bargain for the best price(wage) you should have. When you gain the wage, liberal economists would urge government to take as little as possible from you. When you go to buy something, liberal economists would tell you to search for better price across in the market places. All in all, they would love to see people to look for the best "deals" they could find in the market places. And they believe, the more liberal a market is, the more choices an individual can come across. Among these choices, one should suits the individual best.
Well, then malpractices are still everywhere in the occasions mentioned above. For example, when we search for job, the employer would want to take advantage of us. When we go to shop, the merchant might want to take advantage of us. When we pay tax to government, the government might spend the tax not the way we wanted it to be.
We are free, here, without restrictions. So, we could form union to bargain for our wage, we could form private consumer supervisory body, or even, just by making our purchase decision obvious, to prevent shoppers to cheat on us.(sometimes I found "cheat" is a strong word but it probably suits some taste of certain people) We could make our vote to clearly notify what we do, and we do not want in our political system.
Creating the choice set is therefore the crucial questions here. That is why, in lots of previous articles, I believe in the power of "competitions" and "entrepreneurship." Because these are the driving forces for creating new choice sets in our economy, and these are to promote the welfare of every participants in the economy.
Still, "there is no such thing as a free lunch", if you want to achieve certain outcomes, you have to put some cost into it. For example, if we are looking for better deal in the labor market, we have to place resources into it. Information technology has offered us lots of new opportunities than before to reduce such cost. Nevertheless, we still need to put down some cost for that.
2. government-designed resource allocation system has no better performance than liberal market mechanism
People, when they point out a lot of failure of market system, usually turn their heads to government, believing a political entity can design a better system to mitigate the problem. However, we usually see, governments just screwed up things even further than free market system.
They subsidize the industries that would not have survived without such funding; some politicians benefits from the projects; some claims the benefits they should not have claimed, etc. These are a great deal of "frictions" in government-designed resources allocation. Even from the first places, lobbying activities take up lots of resources already.
We have to bear in mind that governments are run by a collective sets of political parties, which bear conflicting initiatives. These "representatives", no matter what promises they render during election campaigns, usually fail the expectation of general people. I am not saying that they are evil, yet they bear a very different "motivation" or say, "incentive structures" from yours and mine.
If, we allow them to do the overall allocation for us, which means allow the power to levy tax from your pocket in names of providing extra services, we should be worried. We usually find these money did not return in the way of our expectation. As the universal health insurance system in Taiwan, we know the whole medical services industries are paying the price of a cash-leaking system. The doctors and nurses are working in extra hours and some crucial operations are in lack of staffs. Who got exploited? and who got the benefits? and, at the end, who is going to pay??
"Free lunch" problems occurs here. When a institutions or a group of people constantly receive the funding from transfer from the government. They do not feel that they are in need to search for better sets of deals, or, let's say, they do not have to incentive to drive a better outcome. Some of them might do, or, out of good virtues, they make the best use of such transfer. Yet, some just abuse it, and exploit from that. These type of "exploitation" is less-pronounced and people tend to ignore it. Yet, they are as bad as malfunction of markets.
3. What government and market should interact?
Fix? A very efficient and transparent government system should be better than none. Yet, wait a minute, a very efficient and transparent market should do even better.We hope, by understanding of human behaviors or economic institution, we could work out theories and practices that make people are free to make their economic decisions, or say, achieve their best interests by being responsible for the consequence of economic decisions.
Possible Solution:
Free market system as an exchange mechanism is one, yet lots of problems in it are still waiting to solve.
Economists, as people who specialize in these studies, are trying to figure out what the best economic decisions would be. People work, earn wage, consume, save and transfer further.
1. These very same people, by all means, should have the rights to keep the fruits of their labors, private ownership is quite a key here.
People tend to think that liberal economics, or people who promote such thoughts, is hands in hands with big enterprises, which exploit resources, labor and capital alike, in an excessive way. On the contrary, these economists do not promote such ideas. They urge to protect whatever a person should have, via the protection of private ownership.
So, when you offer your labor services, liberal economists believe you should bargain for the best price(wage) you should have. When you gain the wage, liberal economists would urge government to take as little as possible from you. When you go to buy something, liberal economists would tell you to search for better price across in the market places. All in all, they would love to see people to look for the best "deals" they could find in the market places. And they believe, the more liberal a market is, the more choices an individual can come across. Among these choices, one should suits the individual best.
Well, then malpractices are still everywhere in the occasions mentioned above. For example, when we search for job, the employer would want to take advantage of us. When we go to shop, the merchant might want to take advantage of us. When we pay tax to government, the government might spend the tax not the way we wanted it to be.
We are free, here, without restrictions. So, we could form union to bargain for our wage, we could form private consumer supervisory body, or even, just by making our purchase decision obvious, to prevent shoppers to cheat on us.(sometimes I found "cheat" is a strong word but it probably suits some taste of certain people) We could make our vote to clearly notify what we do, and we do not want in our political system.
Creating the choice set is therefore the crucial questions here. That is why, in lots of previous articles, I believe in the power of "competitions" and "entrepreneurship." Because these are the driving forces for creating new choice sets in our economy, and these are to promote the welfare of every participants in the economy.
Still, "there is no such thing as a free lunch", if you want to achieve certain outcomes, you have to put some cost into it. For example, if we are looking for better deal in the labor market, we have to place resources into it. Information technology has offered us lots of new opportunities than before to reduce such cost. Nevertheless, we still need to put down some cost for that.
2. government-designed resource allocation system has no better performance than liberal market mechanism
People, when they point out a lot of failure of market system, usually turn their heads to government, believing a political entity can design a better system to mitigate the problem. However, we usually see, governments just screwed up things even further than free market system.
They subsidize the industries that would not have survived without such funding; some politicians benefits from the projects; some claims the benefits they should not have claimed, etc. These are a great deal of "frictions" in government-designed resources allocation. Even from the first places, lobbying activities take up lots of resources already.
We have to bear in mind that governments are run by a collective sets of political parties, which bear conflicting initiatives. These "representatives", no matter what promises they render during election campaigns, usually fail the expectation of general people. I am not saying that they are evil, yet they bear a very different "motivation" or say, "incentive structures" from yours and mine.
If, we allow them to do the overall allocation for us, which means allow the power to levy tax from your pocket in names of providing extra services, we should be worried. We usually find these money did not return in the way of our expectation. As the universal health insurance system in Taiwan, we know the whole medical services industries are paying the price of a cash-leaking system. The doctors and nurses are working in extra hours and some crucial operations are in lack of staffs. Who got exploited? and who got the benefits? and, at the end, who is going to pay??
"Free lunch" problems occurs here. When a institutions or a group of people constantly receive the funding from transfer from the government. They do not feel that they are in need to search for better sets of deals, or, let's say, they do not have to incentive to drive a better outcome. Some of them might do, or, out of good virtues, they make the best use of such transfer. Yet, some just abuse it, and exploit from that. These type of "exploitation" is less-pronounced and people tend to ignore it. Yet, they are as bad as malfunction of markets.
3. What government and market should interact?
What government could do is to foster the information disclosure system, and help people to understand the information content/quality. In the meantime, government should protect private ownership, and make sure the competition is still health in market places.
Some people argue that some basic rules should be lay out and executive by government to punish for any violation. That puts in hands of people studying law and its involvement into economics. I do believe there are some rules ought to be obeyed. Yet, I do not have a clear cut answer for how these rules should be.
4. The less-fortunate problems: how we help the people like Ronald Davis
The last questions left to answer is how to help for the less fortunate people like Ronald Davis. I would like to divert the reading to my previous article: "Says who we need governments to take care of the less-fortunate?" Taking care of the less-fortunate is also a kind of services, and the cost to render such services could be in hands of every individuals given a bit of supports from time to time, and collectively it would come up as a great forces. We motivate them to have contribution into the society, no matter what kind of jobs they are doing, by directly offer them free warm meals. Is it a "free lunch" occasion? I think otherwise.
They get the meal directly, to reduce the cost for their life to carry on. They must have working in some bad conditions from time to time(usually in Taiwan they recycle things to earn their meal). When they hardly can make ends meet, they could come up for these services. In their mind, they also bear the "cost" of people's good deeds. Yet, instead of setting up a set of rules and tell them they could get money directly from social services run by government. They won't waste "cash" for things they don't need (alcohol, drugs, etc), they won't purposely to meet some requirements(not to find a job,etc). Instead, they would cherish the moment they get help.
In the Facebook link regarding to Ronald Davis, American society is also warm society. Some people are willing to offer him some decent cloth for work, and some people would even introduce him to some sort function of Jobs. That would be in that way, encouraging people to engage into economic activities again, and allow them, with some basic help, to get back on their feet.
In Taiwan we have taken a great initiatives, and even with information technology(As shown in the picture) it could help people to inform the less fortunate where to get the services.
Bernanke: "Both humanity’s capacity to innovate and the incentives to innovate are greater today than at any other time in history"
To keep the market place free, we would expect more innovations come into the market places to fill up the vacuum.
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