> optimal Nash equilibrium where both offer and demand are balanced
This roughly translates to "optimal utopian society which cannot be criticised in any way" right? Right??
This roughly translates to "optimal utopian society which cannot be criticised in any way" right? Right??
For the health system or public transport the nash equilibrium of offer and demand is not what feels optimal to most people.
For manufacturing s.th. like screws, nails or hammers; I really can't see what should be wrong with it.
Free market is an approach to negotiation, analogous to ad-hoc model in computer science, as opposed to client-server model - which matches command economy. There are tons of nuances of course regarding incentives, optimal group sizes, resource constraints etc.
Free market is also like evolution - it creates thing that work. Not perfect, not best, they just work. Fitting the situation, not much else (there is always a random chance of something else).
Also there's the, often, I suppose, intentional confusion of terms. The free market of the economic theory is not an unregulated market, it's a market of infinitesimal agents with infinitesimal influence of each individual agent upon the whole market, with no out-of-market mechanisms and not even in-market interaction between agents on the same side.
As a side note, I find it sadly amusing that this reasonable discussion is only possible because it's offtopic to the thread's topic. Had the topic been more attractive to more politically and economically agitated folk, the discussion would be more radicalised, I suppose.
Just to expand on this really interesting topic. That's where the common pitfall on planned economy begins. Because to some degree a free market can withstand some amount of regulation; after all, external agents trying to manipulate the market are just that, agents in the market. As long as there are other autonomous agents intervening the market will keep functioning as it was. So the bureaucrat has both the incentive and the justification to expand the intervention. In other words, his economical plan didn't work because it was not intervened enough and just if they intervene in this extra thing it will work for sure. That loop continues until the market is 100% intervened, and at that point it requires such a enormous structure of power and control that makes it difficult to fight it (clientelist networks, repressive states, etc).
As I see it, planned economy is strictly not a market, and it is not created as an intervention in the market. It's a rigid resource distribution system without on-the-fly negotiation, typically highly optimised, and without slack and any leeway for its agents. It can be optimal in a limited scope for a limited timespan, but it is rigid and doesn't adapt automatically. These are issues that could be overcome in theory with faster reassesment and distribution adjustment, but there is also practical issue that its agents are, in the end, imperfect people, and they have conflicting incentives. The other side of low slack is low resilience, any unforeseen problem has severe consequences, and it creates destructive incentives for agents.
Janos Kornai has a book "Economics of Shortage" (I haven't read all of that, honestly) that, as far as I understand that, says that lack of openly availible resources in planned economies causes agents to bear a risk of not being able to execute more-important-than-usual orders of their superiors that happen on some special ocassions and thus face severe consequences, in case something in that agent's operations breaks. And due to lack of market, agent cannot fix the issue on-the-fly, only in the next planning cycle. That incentivises agents to not execute their day-to-day roles and hoard any goods they have - in order to exchange them on black market for some other goods and favors wheen need will arise - and it will arise as there will be orders from above and something break and go wrong.
> external agents trying to manipulate the market are just that, agents in the market. I tend to think of a market not as a whole economic system at once, but as a subsection of it - in this way that there are essentially multiple categories markets, as in goods market, labor market, etc. In this viewpoint, external agents are often not a part of market. Regulations affe ofct the agents but are not agents themselves. Target financing - the same. Marketing campaign is out-of-market (as in specifically goods market) manipulation on the consumers by producers to change perceived value of producer's product.
I suspect I could be not terminologically correct there, and the existing terminology here is a bit confusing, again. I'd like to call what I understand as free market "pure market", while the free market is what's commonly understood - an unregulated one. The completely free market, I suppose, tends to not be pure in long term due to positive feedbacks causing some of market's participants to be not-infinitesimal and in the end forming a monopoly or an cartel.
> and at that point it requires such a enormous structure of power and control that makes it difficult to fight it (clientelist networks, repressive states, etc).
Of course, replacement of one massive system with another requires enormous amount of power and control. And planned economy concentrates control and decision-making in one place, instead of it being distributed across all agents, thus obviously the planner would be massive.
I am not an economist in any way, not even education, I was just fascinated by the economic failure of USSR and whether it was avoidable in any way since childhood.