It's become an article of faith among lots of people that recent events prove (or at least suggest) that markets don't work very well.
Let's assume — contrary to what my assessment of the evidence tells me — that the housing bubble and its crash, along with the current ills suffered by Detroit and other sectors, are exclusively the fault of the market.
How much skepticism of markets would this fact generate relative to the amount of skepticism that is justified? I think way too much. The reason is that market successes go unnoticed and, hence, unappreciated.
The vast majority of market exchanges and relationships work smoothly and to the advantage of all participants. Indeed, the market works so well and so consistently that it creates ever-higher expectations among the broad populace. When these expectations are dashed, if only for a handful of persons and if only rarely, the market is deemed to have failed.
But despite the current downturn, the market continues to work well in its typical silence. Do you have trouble today finding gasoline to buy? Are your local supermarket's shelves not stocked with food, wine, and (watch for it soon!) Easter candy? If your cat eats your socks, will you have trouble buying several new pair? If your car's battery dies this afternoon, must you resort to bicycling or public transportation because you can't replace your dead battery? If you're bored this evening with nothing to do, is there no movie you can go to or no DVD you can rent? If you miss your mom in Minneapolis or your boyfriend in Boston, can you not call them on your cell-phone — or even buy a plane ticket and go visit them?
Two items arrived in my e-mailbox this morning to drive home the remarkable success of markets. The first is this excellent short essay by Bob Higgs.
The second is this hilarious, short dialog between the comedian Louis C.K. and Conan O'Brien. (Note that O'Brien mistakenly believes that our modern standard of living is caused principally by technology.) (HT Rudy Schober)