Re: [Pen-l] Paul Davidson sums up

[raghu <mraghu01@xxxxxxxxx>]

On Wed, Mar 11, 2009 at 11:27 AM, Carl Dassbach <dassbach@xxxxxxx> wrote:

What is “the market” and where is it to be found.  Is it the Mercado Central of most Mexican cities or is it my local Wal-Mart.  I would also like to know how  “it” thinks, acts, and  makes mistakes.  Are you all subscribing to some notion of the Smith’s “invisible hand” (which we know is not true).  Kindly clarify. 

Ok, let's be very specific then and consider only the case of credit markets. Under central planning, a bureaucrat decides who gets credit and at what interest rates. The alternative is to use private markets to allocate credit.

We all know such markets are unstable, inefficient, do not allocate credit fairly etc. But when they collapse, a central planner can step in and act as temporary backstop e.g. what the Fed is doing currently. When the allocation is done by a bureaucrat instead, what happens if his investments fail? Who will step in then?

Note this is only an argument against *central* planning.

-raghu.

--

"Due to budget cuts the light at the end of the tunnel has been switched off."

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