Sunday, April 17, 2011

Markets and cronies

From the Shanghai Sunday Daily (17 April; will not link):  "Shanghai's car license plate prices continued to rise in April after reaching a three-year record high last month.  Industry analysts said the rise is within market expectations as the introduction of a policy limiting vehicles with out-of-town plates has prompted a demand for local licenses.  ... The average auction price for a private car license in Shanghai was 47399 yuan (US $7,260) this month, up 742 yuan from March. ... The local government offered 8,000 licenses for auction this month."

These things are tradable, with premium prices going for numbers thought to be "lucky."  I understand also that there are "black" markets.  Why not?

Market mechanisms have obvious appeal.  But they can veer off the tracks when corrupted via cronyism and worse.  And then it is the idea of markets that gets the blame.  Can we get capitalism without the threat of crony capitalism?  The widely cited U.S. example is the internet which reached full steam faster than the FCC and Congress could react.

Is that our best hope?  I hope not.