There is no such thing as a Market Failure
That’s the case in capitalism at least. I do not know when the notion that capitalism was suppose to produce the “right” result every time came about. Capitalism has nothing to do with making companies profitable. What capitalism does is punish failure and reward success.
Over the years I have heard earnest news men and women breathlessly explain the latest so-called market failure. The subprime market fallout is a “market failure.” The tech bubble was a “market failure.” I’m sorry, but these people who say those things are morons.
Laissez Faire capitalism is predicated on the notion that as long as the government keeps its hands to itself the economy will right itself and become stronger because the bad seeds have died off. Think of it another way.
Our economy is a Hummer and the “invisible hand” is the driver. Ridding along in this massive vehicle is every producer and consumer in our economy telling the driver where he should be going, how fast he should be driving, and everything else kids say on road trips. The “invisible hand,” you and me and everyone else in our economy, knows where he is going as long as he has the freedom to take all our information and just drive.
Whenever someone comes up with a stupid idea or invests in a risky and doomed investment the driver will ignore that idea (reducing profits) and in some cases pull over to scold or let out (bankruptcy) the idiotic passenger. Whenever someone comes up with a great idea about where our Hummer is suppose to go the driver will invite that person or company up to the front seat (S&P 500 companies, for example).
Because this system is so successful people have gotten the idea that for capitalism to work everyone must have success. What capitalism does best, however, is punish those who hurt our driving experience and rewards those who improve it. BigT
