Thursday, May 23, 2019

Market radicalism

In the wake of the financial crisis which led the global economy to the brink of the abyss, tenants of capitalism and economic liberalism have struggled to respond to criticism. Proponents of market fundamentalism inspired by ideas of friedman, Hayek and Stigler were more concerned about defending the liberal order rather than addressing market failures. By contrast, many critics who blame today's economic inequality, stagnation and political instability on the free market think  that economic liberalism has run its course because  of its inability to respond to current problems of the society. 

In their book “Radical Markets. Uprooting Capitalism and Democracy for a Just Society”,    Posner and  Weyl (2018) offer a different perspective on markets. They propose some revolutionary ideas on how to use markets to bring about fairness and prosperity for all. Radical Markets turns this thinking—and most of all conventional thinking about markets, both for and against—on its head. The book reveals bold ideas to organize markets for the good of everyone. It shows how  genuinely open, free, and competitive markets can reawaken the dormant nineteenth-century spirit of liberal reformism and lead to greater equality, prosperity, and cooperation.

Eric Posner and Glen Weyl demonstrate why private property is inherently monopolistic, and how we would all be better off if private ownership were converted into a public auction for public benefit. Their solution is a new wealth tax - every individual would put a value on each item (s)he owned and would be taxed on total declared wealth. The tax would enable property to be put to its most profitable use, while raising revenue, perhaps to fund a universal basic income. because rich people own the most, it would be drastically redistributive. Most important, people would see property as rented from society, rather than conferring exclusive ownership. Radical collectivism would replace property ownership in democracy. 

They also show how the principle of one person, one vote inhibits democracy, suggesting instead an ingenious way for voters to effectively influence the issues that matter most to them. They argue that every citizen of a host country should benefit from immigration—not just migrants and their capitalist employers. They propose leveraging antitrust laws to liberate markets from the grip of institutional investors and creating a data labor movement to force digital monopolies to compensate people for their electronic data.” 

The authors say their book is intended to provide fresh ideas for a renewed liberalism. But their intrinsic philsophy is utilitaianism -  pursuing the common good maximises happiness. One criticsim would be that they feel relatively unconcerned with individual and social rights. At the end of the book they suggest that the logical extension of their property tax would be to apply it to human capital ie, to require citizens to declare a wage at which they would work, tax them on the basis of that number and force them to accept any job offers. In another chapter, they argue that every citizen should be given a chance to sell a visa directly to an immigrant, whom they would house and help find work. The economic gains to all would offset the social costs of inequality and power imabalnce this would produce. On voting, they calculate that their proposed electoral reforms could boost GDP by 20% (!) as if that, rather than a fair allocation of power is what really matters in electoral systems.

'Radical markets' is ceratinly refreshing in its willingness to question conventional wisdom.  But the proposals would do little to respond to the fundamental criticism that capitalism has neglected human needs beyond economic progress and that market principles would undermine institutions such as property rights and elections that confer dignity on individuals. Posner and Weil may be viewed in the way radicals ar often perceived, as somewhat eccentric. Still, liberals must find some convincing antidote to populism and nationalism.