The state and goverments are actually what makes capitalism inefficient?

I came up with this question when prof.Wolff answered a question last meeting in january about socialism being inefficient in Venezuela. So the Austrian school blames the state and the goverments and their strong participation in the market, and for the Austrian school that isĀ  what really causes capitalism to be inefficient.

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  • Nicholas Anderson
    commented 2018-01-26 22:28:03 -0500
    This completely comes down to how you define efficiency. The market allocates resources depending on demand which is represented by exchange value. In this sense they are efficient because they facilitate a profit motive for individual who capitalize (pardon the pun) on these opportunities to make money which as a byproduct create jobs and stimulate growth. This is what capitalists mean when they talk about efficiency. This theory works on a couple assumptions; the free market and the rules of competition. The theory that the government is inefficient stems from the argument that it distorts these two principals. Regulations such as minimum wage, environmental protections, etc make up the perceived(and actual) distortions of the market which prevents supply and demand from naturally reaching an equilibrium. The rules of competition are modified by government subsidies. Consider the railroads in the 19th century, which were subsidized by tariffs on trade between the North and South. These tariffs effected the price of southern products nearly twice as much as Northern and the railroads were primarily built in the North. Embodied between these two pole of government intervention is the belief that the governments interference in the market creates noncompetitive markets on one hand and monopolies on the other. Monopolies by their very nature confer control of supply and therefore of demand/exchange value. There is a Utopian premise at work here that argues that it is the government involvement in capitalism that creates these instabilities. This ideology completely ignore Capitals natural tendency to result in monopolies and that it is the power that these monopolies have in the form of lobbyists and campaign donations that create these economic policies in the first place. This is a chicken or egg argument.
  • finny kovac
    published this page in Ask Prof. Wolff 2018-01-26 03:03:50 -0500