One of the big criticisms of free market economics is that markets are driven by greed. “Why would you want to allow markets to set the price of [health care, wages, basic housing, food, education, etc.],” the argument goes, “when that means subjecting a basic humanitarian necessity of the dictates of unfettered greed?” I think this represents a basic misunderstanding of how markets work, and I’m going to try to address that in this post — though I approach the attempt with some trepidation given the difficulties of the subject matter and the limits of the medium.
I’m going to start by conceding a point which those making the assertion I describe above may consider to prove their case: The economic view of market dynamics tends to view individual actors within a market as value maximizing agents. In other words, a market consists of a number of actors each trying to get the most possible value for the least possible expense.
Doesn’t this mean that markets are driven by greed? Don’t we need to encourage people to be something other than value maximizing agents?
Well, certainly, there is much more to life than what you can buy and sell,