Brad DeLong asserts that saying "let the market take care of that" is an "empty slogan."
I disagree. As I argue here, in this reprised post from March 2006, saying "let the market handle it" is quite substantive. It is a recommendation far richer and wiser than saying "let the government handle it."
A Simple Rule for a Complex World
"’Let the market handle it! Let the market handle it!’ Don’t you tire
of muttering this simplistic formula?" So ended an e-mail that I
received from a reader.
It’s true that all of us sometimes are tempted to avoid thinking
hard about complex issues and, instead, to fall back lazily upon
simplistic mantras. We should guard against this weakness, in ourselves
and in others.
At the same time, though, we shouldn’t confuse consistency with
simplicity. The two are different. Just because I instruct my
eight-year-old son to be always truthful does not mean that I’m a
offering simplistic advice; it means, instead, that truthfulness is a
virtue that should be pursued consistently — even if in a handful of
instances my son might be made better off by telling a lie.
I admit that my proposed solution for many public-policy
problems is to say "Let the market handle it." But this response is
neither naive nor lazy. It’s realistic. It reflects my understanding
that almost any problem you name — rebuilding the Katrina-ravaged Gulf
Coast, providing excellent education for children, reducing traffic
congestion on highways — is most likely to be dealt with efficiently,
fairly and effectively by the market rather than by government.
Saying "Let the market handle it" is to reject a one-size-fits-all,
centralized rule of experts. It is to endorse an unfathomably complex
arrangement for dealing with the issue at hand. Recommending the market
over government intervention is to recognize that neither he who
recommends the market nor anyone else possesses sufficient information
and knowledge to determine, or even to foresee, what particular methods
are best for dealing with the problem.
To recommend the market, in fact, is to recommend letting
millions of creative people, each with different perspectives and
different bits of knowledge and insights, each voluntarily contribute
his own ideas and efforts toward dealing with the problem. It is to
recommend not a single solution but, instead, a decentralized process
that calls forth many competing experiments and, then, discovers the
solutions that work best under the circumstances.
To recommend the market is to understand, or at least to cooperate with, the wisdom of James Buchanan’s important insight that "order is defined in the process of its emergence." It is to understand, at some level, Vernon Smith’s awareness that "ecological rationality" is greater than individual or "constructivist" rationality.
This process is flexible and it encourages creativity. It also
denies to anyone the power to unilaterally impose his own vision on
In brief, to advise "Let the market handle it" is a shorthand way of
saying, "I have no simplistic plan for dealing with this problem;
indeed, I reject all simplistic plans. Only a competitive,
decentralized institution interlaced with dependable feedback loops —
the market — can be relied upon to discover and implement a
sufficiently detailed way to handle the problem in question."
None of this is to say that getting the government out of the way is
sufficient to create peace and prosperity. Markets require a rule of
law to ensure that, among other blessings, property rights are secure
and exchangeable. At their best, governments can help to protect our
rights. Markets also require a culture in which commerce flourishes.
Unfortunately, no recipe exists to create the legal
institutions and commercial culture required by capitalism. If these
prerequisites are absent, there can be no market to handle any problem.
So saying "Let the market handle it" is not the same as saying "All
will be just dandy if only the government gets out of the way."
But when these prerequisite institutions are mostly in place,
as they are in the United States and other developed countries, markets
are amazingly creative and reliable. Calling on markets to deal with
problems is then the wisest course.
Alas, though, foolishness frequently triumphs over wisdom.
People too often suppose that large social problems can be solved only
by deciding ahead of time which particular group of people and
procedures hold the key to the solution.
While declaring "Let the government handle it" comes across as
a solution, it’s no such thing. Instead, it is merely a sign of a
simple and baseless faith — a simple and baseless faith that people
invested with power will not abuse it; that political appointees
possess or will find better answers than will millions of people
pursuing solutions in their own ways, and staking their own resources
and reputations on their efforts; that only those ‘solutions’ that are
spelled out in statutes and regulations and that have officials paid to
implement them are true solutions.
So yes, show me a problem and I’ll likely respond "Let the
market handle it." I’ll respond this way because I know that not only
is my own meager knowledge and effort never up to the task of solving
big problems but that not even the Einsteins or Krugmans or Bushes amongst us can know the
best solution to any social problem.
Solutions to complex social problems require as many creative
minds as possible — and this is precisely what the market delivers.