The signers also made a criticism that we often hear from critics of the free market: the idea of market failure. They wrote:
The laissez-faire model assumes that markets work perfectly if the government does not intervene. But unregulated markets are not benign—they reinforce unequal power relations that worsen inequality and hinder the application of key developmental policies—including industrial, social, and environmental policies.
Whose laissez-faire model? No economist I know of who believes in laissez-faire or something close to it also believes that “markets work perfectly.” We understand that they work imperfectly. Our argument is more sophisticated: markets work imperfectly and so do governments. Moreover, the imperfections of government, due to bad incentives, poor information, and poor incentives to get information, are typically much worse than the incentives of for-profit providers.
The economist critics also wrote:
In Argentina as in most other countries with complex economic structures and challenges of income and asset inequality, inflation, and external debt, the need is for nuanced and multifaceted policies that recognize the needs of different social groups.
Who could disagree with that? I would go further. In every country, “the need is for nuanced and multifaceted policies that recognize the needs of different social groups.” That’s what a free market or even a semi-free market is so good at handling. You want bacon. I want steak. She wants tofu. In a relatively free market, we can all get what we want. If you doubt that, then try this experiment. Next time you’re standing in line at a supermarket, check, without being too obvious, what the person in front of you and the person behind you have in their shopping carts. You already know the results of this experiment. What they have in their carts has at most a slight overlap with what you have. In the kind of Venn diagram that Vice President Kamala Harris has said she loves, the area that the three circles have in common is very tiny and might even be a null set. Now compare that to government provision. Governments, partly out of laziness, partly out of lack of information, and mainly due to lack of incentives, tends to favor “one size fits all” provision.
The above is from my latest Hoover article: David R. Henderson, “Critics of Milei’s Policies Strike Out,” Defining Ideas, January 9, 2025. It’s about Milei’s economist critics, but it also respond to their general criticisms of free markets.
Read the whole thing.