Question

What does Tim Harford claim are the advantages of life without markets? What are the disadvantages? Does the idea of life without markets relate to the concept of market failure?

Answer 1

Tim Harford states that markets tend to reward effort, calculated risk-taking, applied creativity etc. Competition is the which allows one to find alternatives in doing business with a variety of lazy, timorous, unimaginative, rude or dishonest people. The regular interaction between producers and consumers in an ordered pattern facilitates this model. However most market interactions are not repeated, and there is certainly a temptation to cheat. Hence it gives a logical reason for holiday guides, estate agents and pension salesmen to gain profits by trying alternate methods which might not be in the best interest of everyone involved. This is a basic issue of markets which can be only avoided by their absence which is the major advantage taht is talked by Tim Harford.

The disadvantages are multiple. There is no interaction between entities and groups on a regular basis without an institutionla framework. Also we already find the problem of assymetric information really prevalent but an absence of market will only widen that. This will result in instability and possibly result in shift of wealth to a selected few.

The life without markets may technically not result in market failure. This is because market failure is based on the notion of a present market. However the consequences of market failure and a system without markets may be very similar. There would be adverse selection, free-rider problem, moral hazard etc