Chapter 3 - The Market: How it's supposed to work Flashcards
Unrelated free market worth minimal government intervention ends up in?
limiting individual freedom
restricting property
undermining efficiency
How do markets contribute to the public?
efficiency
prosperity
individual freedom
What kind of markets do we need?
Democratically accountable market institutions
What two critical elements define capitalism?
1) A kind of marketing in which the productions are preserved privately, not by the state or by communities or by the workers.
2) The labor that is used in production is obtained through voluntary market exchange: the labor market.
What are the two primary arguments in defense of capitalist markets?
Capitalist markets promote freedom
Capitalist markets promote efficiency & prosperity
The best possible outcome of a process:
Optimally
A distribution of things such that no one can be made better off without someone becoming worse off:
Pareto Obtimally
A situation in which by redistributing things at least one person could be made better off without anyone becoming worse off:
Pareto suboptimally
Free markets generate Pareto optimality of distributions of things exchanged on the market
Basic claim about markets
Two kinds of Efficiency in markets:
Allocative Efficiency
Dynamic Efficiency
The distribution of things is Pareto optimal:
Allocative Efficiency
Optimal innovation and growth through incentives for risk taking
Dynamic Efficiency
State coercion inherently reduces freedom, therefore limited government rather than an affirmative state:
State incompetence and State malevolence
