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The founding Neoliberals believed that no government had enough access to economic information to accurately plan an economy and that only the invisible hand of the market could make such decisions.

This is what infuriates me most in neoliberalism. It applies the same mistake as Social Darwinism when it misunderstood Darwinism.

If you make plans, you need two kinds of inputs: infos about the present state, from which you can extrapolate, and goals, which you want to work towards. By relying on the Invisible Hand, you don't just spare gathering accurate information of all things affecting the economy, but also forfeit setting the goals.

The neolibs get around this with the unstated setting of "efficiency" as the ultimate goal.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Mon Mar 19th, 2007 at 10:10:39 AM EST
I never thought of the parallels, but that is true. Also,

The neolibs get around this with the unstated setting of "efficiency" as the ultimate goal.

...which leads to other understated or even hidden goals of dismantling percieved inefficiences such as "entitlement" programs.

by andrethegiant on Mon Mar 19th, 2007 at 10:45:51 AM EST
[ Parent ]
To further that parallel: the market, like natural selection, works towards a certain direction in a given environment. Thus even in the stable regime the marketistas erroneously assume all free markets reside in, that glorious 'efficiency' is the measure of something relative: the development of the most efficient production under the given conditions. Yet these conditions include resource availability, geography (limits on transportation), social norms, prevailing ideologies and religions, laws, and yes: regulations...

My favourite example for the neolib-dogma-busting practice of using the markets with a goal, that is to set the rules with the aim of getting efficient solutions in a pre-set desired direction, is a feed-in law: by fixing guaranteed purchase prices for regenerative energies, manufacturers of the latter can have a boom market of their own, large enough for the manufacturers to accumulate enough funds for competition by further development.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Mon Mar 19th, 2007 at 01:00:48 PM EST
[ Parent ]
Neo-liberals also "forget" that, according to Walras (and also in the Arrow-Debreu model), a condition for the existence of a market equilibrium is the "survival assumption" i.e. the fact that agents do not need to exchange to survive, even their workforce.

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Mon Mar 19th, 2007 at 05:28:21 PM EST
[ Parent ]
Of course, every major corporation in the world makes quite elaborate economic forecasts. Somehow, governments cannot do the same according to neolib ideology.

In fact, neolibs are required to pretend that there is no such thing as a "firm" and that economic transactions are between individuals, because otherwise they would have to deal with the differences and similarities between firms and governments. The doctrinaire libertarians will claim that the fundamental difference is that firms do not exercise police powers, but this is a fraudulent claim as if the policing of the property system on the part of the government were a natural occurrence.

For the neolib the following major factors of modern economies are invisible

  1. organizational properties of large corporations where waged employeed make decisions about OPM and essentially take on all the functions of governments incuding the planning that is supposedly impossible.
  2. Marketing - a multibillion dollar industry that makes a mockery of the full information assumption.
  3. Military and quasi-military spending - e.g. such minor firms as Boeing and Airbus.
  4. Education and public sector R&D - e.g. the internet and transistors.
by citizen k (sansracine yahoo.fr) on Mon Mar 19th, 2007 at 11:19:02 AM EST
[ Parent ]
I used to joke that when economists write down a model they unleash their "inner central planner". Clearly, they assume the have knowledge of all relevant factors in a problem and that they can figure out the consequences of various actions.

"It's the statue, man, The Statue."
by Migeru (migeru at eurotrib dot com) on Mon Mar 19th, 2007 at 05:27:44 PM EST
[ Parent ]

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