LCE: Market vs. Government, vs. Government and Market Institutions

The is a Lazy Comment Essay, where I copy a comment from elsewhere as a short essay.

This comment is in response to a comment thread in the diary on the European Tribune – LQD : Towards an Institutionalist Political Economy – a Manifesto.

ChrisCook says:

Re: LQD : Metaphysics

I believe that the problem is Metaphysical. The assumptions that underpin conventional Economics bear no relation to reality as we know it.

They are distorted in a way designed to suit the beneficiaries of the value flows that result from the surreal financial structures that comprise our current Economy.

linca replies:

Re: LQD : Metaphysics

I think one of their point is that not only money is important, and that economics, as a social science, needs to look beyond money, as it is not the only means of social exchange – that is basically the basic axiom of current economics, that are way to much based on econometrics.

The vote, the christmas gift, the exchange of drink rounds, are also important means of economical interaction, but are denied by the modern economics influenced thinking.

My Lazy Comment Essay, after the Fold.

Even more central, money is only important …

… to the extent that decentralization of production, consumption and productive investment decisions are beneficial.

From an ecological economic perspective, there are a large number of complex systems that must be designed if we are to mitigate the already existing impacts of our economic activity, much less to move toward an ecologically sustainable economy.

On the one hand, markets cannot design complex systems.

On the other hand a government, whether public or privatized, which can design complex systems, can only do a certain number of things well at any given point in time.

Therefore, high level public governments need to identify the highest priority complex systems that need to be designed, or those that private government is least likely to design well, and tackle those, and establish frameworks that provide incentives for lower level public governments and for private government to design the balance.

The limitations of government implies that we need both market solutions as well as appropriate decentralizations of those goals that lower level public government can effectively pursue. However, making that decision based on the interests of private government is absurd … corporate charter entitlements ought to exist on sufferance, due to public benefits of the existence of the chartered corporation, and not as some sort of intrinsic right.

Money is an important instrument of that process, but acting as if money is intrinisically important is akin to thinking that diseases are caused by imbalances in the amount of blood, lymph or “bile” circulating in the body.