Study Guide to Man, Economy, and State with Power and Market

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Chapter 12: The Economics of Violent Intervention in the Market 157 Chapter Outline 1. Introduction The bulk of the book has concentrated on the free society, in which everyone respects property rights. In this chapter we analyze (using economic science) the effects of violations of property rights, and in particular the effects of State action, i.e., institutionalized and widespread violations. Note that economics does not “assume” laissez-faire at any point, but instead objectively demonstrates the outcomes of both free and coercive institutions. 2. A Typology of Intervention Intervention is the intrusion of aggressive physical force into society. The economic analysis of “private” coercion is the same as government coercion, but we focus on the latter because of its greater prevalence and number of apologists. Autistic intervention occurs when the aggressor uses force on an individual such that no one else is affected. Binary intervention occurs when the aggressor establishes a hegemonic relationship between himself and the victim. Triangular intervention occurs when the aggressor uses force to alter the relations between a pair of subjects. 3. Direct Effects of Intervention on Utility In a free market, people only participate in an exchange if they believe they will benefit; thus the market “maximizes” ex ante utility of everyone in society. Any intervention, in contrast, increases the utility of the aggressor and necessarily reduces the utility of the affected subjects.
158 Study Guide to Man, Economy, and State with Power and Market 4. Utility Ex Post: Free Market and Government People always expect to benefit from voluntary exchanges, and in practice they usually will do so. In particular, inept businesses soon go bankrupt while entrepreneurs who make good forecasts earn profits. In contrast, in the government sector there are no mechanisms to minimize error. When a government policy fails in its stated objectives, the politicians do not necessarily suffer and the voters may not be sophisticated enough to perceive the true causes of the failure. (A good summary is at the bottom of p. 891.) 5. Triangular Intervention: Price Control A price control involves the use of force to alter the terms on which individuals exchange goods or services. When the government sets a maximum price (or price ceiling), it threatens force against anyone caught charging a price above a specific amount. Maximum prices lead to shortages, i.e., situations where quantity demanded exceeds quantity supplied. (A prime example is the shortage of apartments due to rent control.) When the government sets a minimum price (or price floor), it makes it illegal to pay below a certain price. Minimum prices lead to surpluses, i.e., situations where quantity supplied exceeds quantity demanded. (A prime example is the unemployment due to the minimum wage.) 6. Triangular Intervention: Product Control Product control regulates the product itself, or the people involved in the exchange. (In contrast price control regulates only the terms of trade.)
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CONTENTS INTRODUCTION . . . . . . .
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In June of 2004, I became convinced
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Introduction ix appropriate, I have
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Chapter Summary In a money economy,
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Chapter 4: Prices and Consumption 4
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Apriorism, 1, 9 Ability-to-pay prin
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Index 251 Equilibrium, 47, 104 macr
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Index 253 Medium of exchange, 27, 3
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Index 255 See also Economy, Evenly
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