Question

Russell Roberts, The Price of Everything: A Parable of Possibility and Prosperity

In chapter 10 of the story, “No Host No Problem,” Ramon accuses Ruth of “romanticizing the market” and of “romanticizing profits.” Ruth agrees but candidly replies that the market “deserves some romance.” What does she mean? (Hint: the specific tangible benefits of the invisible hand vs. short-run government policies.)

Answer 1

When Ruth says market does deserve some romance ,emphasize is on the role market plays in the economy.Market performed a variety of functions like facilitating the exchange of goods and services, setting prices and rationing.

Invisible hand is a natural force that self regulates the economy.Adam Smith was of the opinion that individual decision In a market economy to benefit them would actually make the economic society better as a whole.How ever the term can still be used to describe how the self interested behaviour of people in a market place leads to the greater good of all.And there is denial that if the proper economic and legal institutions are set up,we can all be made better of simply left to our own devices.

Markets are pretty good at allocating resources where they are most needs, even though there are exceptions to this rule.

The government policies are introduced with particular objectives(short run as well as ).How ever the effect of government policies will be different on different people. The long rum consequences of some economic policies may become evident in few months .others may not become evident for several years.still others may not become evident for years.

Government's Short run policies can also be regarded as the reason for 2008-2009 recession. Economic system prevailing in the US and most of the western countries have heavily regulated financial markets.The creation of money and credit and the rate of interest they charge to burrowers are not truly market based.Governments and the central banks created the crisis because,for years fed has been increasing the quantity of loanable funds.

The tequila crisis was also triggered by the policies of the government to cater election requirements.

Macro Economic mindset prevents the understanding of markets.For a market economy to succeed ,government intervention should be limited by proper legislations .How ever government should intervene if the interests of citizens are harmed.