Wednesday, October 10, 2007

Killing another myth

This could also be the sixth and last episode of "Public vs private", where the conclusion is drawn that to achieve an efficient economy turned toward people needs, one has to combine public and private sectors:

"The last myth worthy of mention is the social Darwinist myth, often the modern economist's myth, which warns against soft-hearted liberalism on the grounds that "real life" is competition and struggle, of "nature red in tooth and claw" in Tennyson's evocative phrase. Social Darwinism holds that economic progress is the story of competition and survival of the fittest. Some groups dominate; other groups fall behind. In the end, life is a struggle, and the world today reflects the outcome of that struggle.

Despite the fact that much free-market economic theory has championed this vision, economists from Adam Smith onward have recognized that competition and struggle are but one side of economic life, and that trust, cooperation, and collective action in the provision of public goods are the obverse side. Just as the communist attempt to banish competition from the economic scene via state ownership failed miserably, so too would an attempt to manage a modern economy on the basis of market forces alone. All successful economies are mixed economies, relying on both the public sector and the private sector for economic development. I have explained the underlying theoretical reasons why markets and competition alone will not provide efficient levels of infrastructure, knowledge, environmental management, and goods. Just as that is true at the national level, it is also true internationally. Without cooperation, a collection of national economies will not provide efficient levels of investment in cross-border infrastructure, knowledge, environmental management, or merit goods among the world's poor."

(Jeffrey Sachs, "The end of poverty, economic possibilities for our time", chapter "Myths and magic bullets")

1 comment:

Fran├žois Ascani said...

I totally agree with this mixture of competition and cooperation. Contrary to what is thought in general, Nature has plenty of examples where cooperation is the rule, such as the many cases of parasitism. In game theory also, it was found that cooperating individuals can overcome competing ones (see for instance The Evolution of Cooperation by Robert Axelrod)