Myths of Market Failure | Thomas J. DiLorenzo

Mises University 2017. Recorded at the Mises Institute in Auburn, Alabama, on 25 July 2017.
The Myth of Natural Monopoly: mises.org/libr...
A Note on the Canard of "Asymmetric Information" As a Source of Market Failure: mises.org/libr...

[@robertmiller6444]

It seems that the glaring elephant in the room that these market-phobes fail to grasp is this: they views markets as single isolated games instead of an open-ended series of repeated games. That is, most businesses want to engage in multiple repeated games. In order to do so, this precludes the possibility of playing zero-sum strategies as that will terminate any opportunity at engaging in repeated games. The only way to be able to engage in repeated games is to engage in cooperative strategies or else all potential exchange partners will not enter into exchange if the strategy that will be played is zero-sum. Only the con-artist plays single isolated games. But since they are playing single games they are playing zero-sum strategies. Or more correctly, since they are playing zero-sum strategies, they are necessarily playing single isolated games. And then once played, they must relocate to a new playing field with no knowledge of their previously played games. This is why "name brands" can charge a premium. A "name brand" gets that way by building a reputation of repeated cooperative games. Having established a reputation of playing cooperative strategies, one has the confidence that a zero-sum strategy will not be played thus there is a basis of trust to be able to safely engage in exchange.

[@obviouslykaleb7998]

Ron Maimon Cooperation with the consumer, not the other businesses.

[@freemason4979]

U sir, R a gentleman and a scholar !

[@kimobrien.]

@@freemason4979 The profit is the result of exploitation and that is why capitalism as you know it is coming to an end.

[@freemason4979]

@@kimobrien. And what do U want instead ?

[@kimobrien.]

@@freemason4979 Workers control of industry and a revolution like the 1959 Revolution in Cuba that brings the working people to power. No one in Cuba was told they could be an administrator Doctor or Engineer especially if they were good at it what they were told is they could no longer use their position to exploit others. The salaries of Judges and government officials were cut and the young people mobilised to teach the Peasants to read so they could not be fooled. The big farms were broken up in a land reform that gave land to those who worked it. The first machines to harvest sugarcane in the world were built in Revolutionary Cuba and industry was nationalised and placed under control of those who worked at on the job. Rents and utility charges were cut.

[@joanneortiz3251]

I use a Dvorak keyboard when I write in English. It does tire out your fingers less, but you can easily set it to be a "virtual keyboard" on any Mac or Windows machine. You just have to get used to the fact that a key doesn't correspond to the letter printed on it. Once you get the hang of it it's not a big deal, I switch back and forth frequently as my job requires me to write in multiple languages. No market failure, just a little personal research and learning required.

[@LawrenceTimme]

Private roads are great and highly under rated. The best example I have seen for a modern usage where private roads could solve a real problem is with conjestion in big cities. If the tolls were able to be set at market rates then busier times of day would command a higher price and the person who owned the road will want to set the prices to maximise the profit from the road usage. If the price was higher at peak times, less people would choose to commute at that time as it might not be worth it for them to travel at peak times. This would result in the traffic being evened out to a certain extent. Atm you only pay in time to commute at peak times whereas in a private toll road situation you would pay in money as well. Also a private road owner has some incentive to try and make the road system more efficient and potentially upgrade it in capacity if they think that increasing capacity will make them more money. Where as the government often fail to recognise these situations as the people making these decisions don't have local knowledge, if you want to put it another way, the roads systems are effectively being centrally planned.

[@chuckmartin935]

Tom is a awesome speaker-wish he'd do more. He's worthhis fee.

[@dmur612]

I am fascinated by the fact that most of what Mises U publishes on this channel & of what DiLorenzo and many others have said about the division of labor & market specialization, something SO self evident, SO common in knowledge, that it DOES NOT immediately elucidate the absurdity of looking to Congress, The Senate or the POTUS for solutions to lower health care costs...

[@Jekyll_Island_Creatures]

People learning about Dr. Josh Umbehr's free market medical practice could play a huge role in lower health care costs.

[@porcudracului]

They can't since the healthcare industry is not private.

[@edwaggonersr.7446]

We should call falling prices, falling prices, not deflation. Don't you think?

[@smorrow]

"Rent seeking"

[@authenticallysuperficial9874]

It depends on whether it results from burning money. If so, it's definitely deflation.

[@authenticallysuperficial9874]

Still a good thing though

[@authenticallysuperficial9874]

"Falling" prices and "Deflation" both have the provlem of containing words with negative connotation.

[@jscottupton]

Too bad that today's economists are not as wise as 130 years ago. I, too, have never understood how you could have "market failure". That's kind of like having a "failure of the law of gravity" or a "failure of the biological sciences".

[@akirak1871]

In almost every case I've heard of, the things labelled "market failures" are actually markets not being permitted to operate. I always tell people: there are two sectors of the US economy that are highly dysfunctional and commonly cited as market failures, yet these are the two most heavily regulated industries, and in fact, major players in these industries ARE government institutions. Those two industries are banking and healthcare.

[@WordBearer86]

Here's one I'm stumped on; The Shell Shortage of 1915 which the British government appointed Sir Lloyd George to oversee. The guy I'm discussing this with keeps bringing this up as a case where the market failed to supply the munitions. Granted there's a great deal of context he's declaring irrelevant, but a lot of where my argument tends to fall on is that British military spending focused heavily on the Navy and not the Army/BEF, so demand for shells was low from the army which did not use naval caliber artillery. Or had little if anything close to it, it was going to take time regardless for the supply to meet up with demand, but he claims that the market failed so the government had to step in and organize a war-time economy. Frankly I think he's being unreasonable with this, but anyone see a different approach maybe?

[@Pdrum2]

Ulric Kessler No doubt shell shortage was due to price controls

[@obviouslykaleb7998]

Ron Maimon You mentioned amazon as a monopoly. Monopolies generally try to increase their prices or lower their quality and Amazon hasn’t done this. Why? Profit. They are smart enough to know that by lowering their standards other competitors will appear, and they don’t want that. Hence, they keep their prices low and their quality high. Free market wins once again.

[@benjaminhentschel4543]

You are making a dangerous comparison between social and natural sciences. There is no such thing as an economic law, it is a social science, which bases itself on heavily faulted assumptions concerning human behaviour. Market failures do occur.

[@simonsarevski6532]

Why are u not putting all articles mentioned in the speech in the notes of the speech?

[@simonsarevski6532]

But the problem with that it I have to stop the video google then continue. Most of the times I can't do that due to doing sth else while listening -_- but yeah I get ya

[@JohnDoe-nq4du]

The Czechs were probably laughing at your pronunciation. You have it spelled right, but the pronunciation is somewhere closer to dvore-zhack.

[@passingthetorch5831]

Coincidence that his name was Meade?

[@anarchic_ramblings]

They were laughing at your pronunciation. Vorzhak

[@trogdorstrngbd]

He brings up a number of good, even great at times, points. But some of his examples and arguments are incredibly weak. What about US Standard Measurements vs. metric for path-dependence? The "pollution in the Soviet Union" argument was such a straw-man since there were obviously a lot of other problems going on over there at the time; far better would have been to examine whether a capitalist country without environmental regulations eventually reduced pollution through market action.

[@porcudracului]

You're missing his point. He compares free market with socialist/heavy regulated ones. You can have the comparison you want today, with China and India.

[@LawrenceTimme]

Pollution would be a violation of the Nap if we privatised the air, the rivers and the oceans. That would fix any potential pollution pretty quickly

[@sdozer1990]

Don't we already have privatized land, minerals, water, and air? I guess I could ask if we have those 'to a point' and the answer would be yes. I don't have data for this, so I'm not certain if privatizing the atmosphere, rivers, and oceans would be a net benefit to the people over the costs. Wouldn't we see the deplorables dying en masse, you know the people who don't work...? So which part of Christianity concerns killing off millions of people who decide not to work (at least not until the end of the world)?

[@Randomguydrm]

sdozer1990 there is private ocean property. Those Individuals found sth like a Propertycommunity like in a house and improve the quality of the ocean.

[@LawrenceTimme]

@@sdozer1990 the main problem is that there is public property, that should not exist.

[@poetmaggie1]

government has done more to destroy business and free enterprise than free enterprise has done to insure that our government is not oppressive.

[@killer14bee]

Can someone please explain to me how the early receivers of money from a central bank get to use the money first to buy goods and services and as it goes on and on into the hands of later receivers, prices have increased and the money has lost its purchasing power, and how in this way earlier receivers gain at the expense of later receivers? How does this process distort the economic system and redistributes wealth from the later receives of money to the early receivers?

[@killer14bee]

I'm not sure I understood that. Put it in different words like you said you can! By the way, if money is DEBT in this monetary system, then that means that the early receivers go into debt and if the central bank charges it back at interest that means that the amount of debt will always be bigger than the amount of money in circulation, so defaults and bankruptcies are a part of this system's nature, right? And one more thing! How are hose who haven't borrowed,(the later receivers) debt slaves?

[@troll_kin9456]

It sounds like you've already summarized it all pretty well in plain english: because the first receivers of the money now have more money than before, their demand for goods relative to money, increases, and they spend more than they otherwise would. The sellers of those goods are, other things equal, experiencing more demand for their product than before, but their supply of product is unchanged. Prices will therefore tend to be bid up higher than they otherwise would be in order for the supply to match the demand. Note that the higher demand for goods is only revealed by the actual buying of product, so prices will only rise after the new money has begun to be spent. Those people who haven't yet received the new money are also experiencing these higher prices, and must pay more than they did before in order to buy the same goods, but their incomes haven't yet increased. They are made poorer, while the first receivers of the money get free goods. To put some numbers to it: Person A has $10,000 and gets another $10,000 from the central bank They go out and spend that $10,000. The prices of the things they buy are bid up as they're buying them, so they may not get their full $10,000 worth, but they will get more than $0 worth of free goods, so they began with $10,000 and end $10,000 + some quantity of goods Person B begins with $10,000, but does not have additional money to spend. Person B must pay higher prices out of pocket as Person A spends. Assuming that Person B eventually gets that same $10,000 of new money (this is an unrealistic assumption since new money, in the real world, is spent by just a handful of people, and must eventually be divided among the mass of income earners. Note that people who don't earn an income at all, such as retirees, will never see this new money, but have to pay higher prices for goods.), they will be able to purchase some amount of goods fewer than what Person A was able to purchase with the $10,000 from the central bank, because prices are now higher. Additionally, Person B had to shoulder those higher prices during the time it took for them to receive the new money. So person B ends with some amount less than $10,000 + some amount of goods fewer than what person A was able to purchase. Now you might be inclined to say that, given these ranges, it's possible that both were made better off from the money creation. Maybe our theoretical outcome is that Person A ended with $10,000 + a used Mercedes, while Person B ended with $9,999 + a used Toyota. But we know that this end of the range is limited by the fact that no new goods - that is real wealth - were created. So whatever the net result is, the gains that Person A experienced, have to at least be as much as the losses that Person B experienced. The only result then is that Person B has to have been made worse off than Person A both in relative and absolute terms. Anyways, that's my crack at a more detailed explanation.

[@mpmitchell2112]

because as the new money gets spent into the economy it pushes up prices (more money chasing the same amount of goods.services = higher prices). The people who get the money first spend it before prices have risen. The people spending money after prices have risen get the effect of a tax on the purchasing power of their cash balances. side note but, Its also important to understand that as the new money enters the economy it does so in specific sectors pushing those prices up first (think housing boom).

[@akirak1871]

Question: WHO gets new money? When the central bank prints it up, who does it usually go to, and what are the terms? Does the central bank use it to buy something on behalf of the federal government, or are they just handing it out to some entity or another?

[@mpmitchell2112]

it usually goes to banks... this might sound crazy but when a central bank issues new money, it goes first to the banks lol. The banks then usually loan it out to business (this is what causes the boom-bust cycle) who then go out and buy labor and capital goods in the market place (which pushes up the prices). Those business get the money first, before prices have risen, and then once wages are paid out down the structure of production, prices have already risen amounting to a tax on the later receivers of new money. Sometimes the central bank does indeed buy federal govenrment assets, thats another word for bailout - ya know, when a city govt or social security or the great bank bailout of 2008.

[@DrBlighty]

How does he explain why so many US citizens are not covered by a health care scheme?

[@beatsNstrings]

when the american medical association formed their explicit mission was to cut the amount of medical schools by half, outlaw all alternative practices, to preserve their prestige and salary. what do you think happens when you drastically restrict the supply of a good? then erecting a barrier of entry such as forcing 8 years of schooling and large debt just to be a low level doctor who can prescribe antibiotics to a person with a flu. extreme restriction of supply and barrier to entry, then getting the government welfare programs involved stokes the demand. restricted supply, stoked demand, what is going to happen? prices skyrocket and it was all by design. but it was so long ago that no one knows or asks the question. they point the finger at the free market and just keep regulating away.

[@porcudracului]

​@@beatsNstringsit's cost free to blame the market. Who's gonna make the politicians pay?

[@Somuchcooleronline1]

Does anyone know how to spell the names of the two economists mentioned @25:25-25:32?

[@zalida100]

I don't know if these are the correct people, but at least you can see the names spelled www.utdallas.edu/chairs/profiles/liebowitz.html philosophy.ubc.ca/persons/eric-margolis/

[@aubreyjames8795]

i hope theyd make degradable rings to protect the fish.

[@mace2142]

buy bitcoin

[@Angrylittlelouie]

😂