Debunking Market Efficiency

Millions of tons of food are thrown away each year in the first world, while millions are starving in the third world, and at the same time you can buy a $2000.00 gold-plated pizza in New York. That's the miracle of supply and demand in action...

Yes, that gold plated pizza exists and according to CNBC reporter Robert Frank (personally I've never had the privilege to try it out) it's a damn good tasting pizza as well: I ate a $2,000 pizza — and I want it again. And yes, obesity is a larger social problem in America than hunger. But hunger still exists in the richest country in the world, so even on a national or local level the forces of supply and demand are unable to efficiently distribute food, or any other products for that matter, to those who need them. Markets, free or otherwise, are a means to distribute goods and services, and exist separate from how these goods and services are produced; see yesterday's post for more on that. However, coupled to a capitalist system of production, there will always be an inherent difference in bargaining power between producers and consumers, as well as employers and employees; there are no free and voluntary exchanges in free market capitalism.

In economics, a free market is a system in which the prices for goods and services are self-regulated by the open market and by consumers. In a free market, the laws and forces of supply and demand are free from any intervention by a government or other authority, and from all forms of economic privilege, monopolies and artificial scarcities. Proponents of the concept of free market contrast it with a regulated market in which a government intervenes in supply and demand through various methods such as tariffs used to restrict trade and to protect the local economy. In an idealized free-market economy, prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy.
_{source: Wikipedia}

The capitalist free market economy incentivizes overproduction and therefore a waste of resources and time, and causes a myriad of environmental problems. To see how the free market in itself causes overproduction (and overstocking of supermarkets), pleas watch the video; I'm currently a bit tired of pointing out the obvious. I'm also tired of the typical libertarian criticisms that are bound to follow, as I've debunked those on many occasions in the past; lucky for us that the video also mentions those. What's abundantly clear to me is that we need systemic change and that we need to rediscover our shared humanity. For that to happen though, we need to recognize (and feel ashamed of) the unjust inefficiencies of our current paradigm; letting people starve because it's the profitable thing to do. Let's try to think of a system that incentivizes us to do the humanitarian thing instead. I'm open to suggestions...

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