Theological economics

Market fundamentalism

markets are just one among many social means of rationing. Anything scarce relative to demand for it raises the same question: Who will get it and who must do without it? The market is one institutional way to ration the scarce item. In a market, those who want it bid up its price leading others to drop out because they cannot or will not pay the higher price. When higher prices have eliminated the excess of demand over supply, scarcity is gone, and no more bidding up is required. Those able and willing to pay the higher prices are satisfied by receiving distributions of the available supply.

The market has thus rationed out the scarce supply. It has determined who gets and who does not. Clearly, the richer a buyer is, the more likely that buyer will welcome, endorse, and celebrate “the market system.” Markets favor rich buyers. Such buyers in turn will more likely support teachers, clerics, politicians, and others who promote arguments that markets are “efficient,” “socially positive,” or “best for everyone.”

Yet even the economics profession—which routinely celebrates markets—includes a sizable—if underemphasized—literature about how, why, and when free (i.e., unregulated) markets do not work efficiently or in socially positive ways. That literature has developed concepts like “imperfect competition,” “market distortions,” and “externalities,” to pinpoint markets failing to be efficient or benefit social welfare.