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David Friedman- Liberland 5th ANNIVERSARY

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What I want to talk about is the general issue of market failure And in particular, its relevance to the issues raised by the current pandemic And I'm going to claim that market failure is indeed a real problem But, it is not a problem that is specific to market It is a problem that exists in a wide variety of different contexts Market failure is often used as an argument for government intervention in the economy or in the world And it in fact is an argument for that But I want to claim that it is a stronger argument against the alternative That market failure is a reason why a laissez-faire free market does not always do the right thing But it is a stronger reason why the alternative to a laissez-faire free market is unlikely to do the right thing And I think that's true even in the case of contagious diseases Which some people would argue perhaps correctly are one of the stronger arguments in favor of government Let me start by explaining what market failure in my view is: Market failure describes a situation where individual rationality does not lead to group rationality where each individual takes the correct action in his own interest, and yet we're all worse off as a result and the reason that can happen is that each individual acts in terms of consequences for himself and those he cares about Sometimes individual actions have effect on other people So it is possible to have a situation where my act benefits me but harms us Your act benefits you, but harms us and we're both worse off as a result The standard example that any of you who have taken econ courses have probably encountered is prisoner's dilemma That's a two-person example of market failure where the two prisoners both confess when they would be better off if they both kept their mouth shut because each one correctly believes that he is better off confessing than not confessing My favorite standard example is one which could happen somewhere pretty close to where Liberland now is about a thousand years ago I want you to imagine that you are one of a line of 10 thousand men with spears Your spears are all pointing in that direction, and the reason they are is that another 10 thousand men on horseback with spears are coming at you You do a very quick cost benefit calculation You say, "If we all stand our ground and keep our spears solidly planted with luck we can stop their charge and some of us will die but most of us will live. If we run, horses run faster than we do I'm sorry, I made a mistake. I said "we". I don't control him and him I only control me If I run and everybody else stands One man out of 10 thousand has

Video Details

Duration: 19 minutes and 31 seconds
Country: United States
Language: English
License: Dotsub - Standard License
Genre: None
Views: 23
Posted by: on Apr 22, 2020

Conference in Virtual Reality. Complete list of speakers may be found at

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