Thursday, February 01, 2007

ACS v. FedSoc: Markets or Management

Markets or Management

          Citizens resort to the judicial system when other social institutions ignore their needs, and the image of judge as problem-solver is the core of judicial legitimacy in America. Toward strengthening that legitimacy, judges must not excuse inequity by prostrating themselves to the sanctified “market.” In its language of origin, economics, a free market is the optimal mechanism for allocative questions only when it is unimpeded by market imperfections and satisfies certain assumptions. These assumptions are abstractions that cannot be met in the real world (e.g. “perfect information”) and indeed economists look to government to assuage imperfections (securing property rights, combating monopolistic practices, etc.). It therefore is a distraction to claim that belief in the free market preempts judicial decision-making that does not blindly rely upon markets. In fact, the use of judicial power (or the power of any branch of the government) to address market imperfections is an implicit endorsement of market economics and concurrent recognition of the problems in translating theory into practice. A judge may use or manipulate markets in affecting her decision; however, they should never become captive to them: markets are incubated and bounded by state institutions; the legal system is foremost among these.
          While it is certainly fair to say that our political system is riddled with inefficiencies that hamper its ability to address externalities in economic markets, that recognition amounts to nay-saying. Admitting the existence of externalities, who but the government will even attempt to address them? Furthermore, the unfounded association Rick makes between managing the market and price controls is far too narrow a reading. An aggressive program of internalizing social costs would serve to raise the price of most goods (if a polluter must account for his/her emissions, they will increase the price of their good to cover this additional production cost).

      To see a FedSoc Member's take on this issue, click here.

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