Monday, September 11, 2017

Love and markets

Just a few days ago I posted this:
When natural disasters occur, supply and demand is a lifesaver. It is the way to reallocate resources to stricken areas (people). Price signals do their work when they are allowed to reflect new realities: when they ration on the demand side and elicit on the supply side.  But banning price hikes (anti-gouging laws) stymies both adjustments, making bad situations worse.
The standard debates that always follow pose the usual questions.  (1) Is altruism not enough?  (2) Why not enough altruism? (3) Do market responses crowd out altruism? (4) Would not altruism be better?

The inevitable politics of pander follow with price controls that offer fake answers to serious questions.

We hear much the same when it comes to markets for human organs.

One would think that Adam Smith settled this some years ago. "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest." He apparently had not. The same dance seemingly follows every calamity.

Non-zero-sumness is a wonderful thing. We find it in markets and we find it in altruism (love).  They are both good news. The bad news is that many people see the two phenomena as absolute substitutes; e.g. you cannot have one without the other.
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