Reinventing the Bazaar Chapter 1 Discussion

"A market for something exists if there are people who want to buy it and people who want to sell it." Although this may seem to be a relatively simple explanation, it is the foundation of market economies. For a market to work, people must be willing to sell and buy goods freely. Both parties must have the opportunity to negotiate, reject, or accept an agreement in a market. In other words, autonomy is essential in the creation of a market. In addition, "no one is in charge of a market-- or rather everyone is in charge." The transactions and freedom markets instill, mold an economy as a whole. 

"Markets provoke clashing opinions. Some people revile them as the source of exploitation and poverty. Others extol them as the font of liberty and prosperity." Both arguments in the quote are present in the modern economy. The debate, however, is not as prevalent in times of prosperity. Only when an economy falls into a recession or depression do people start questioning whether the government should intervene in the markets or let them expand on their own. 

People may distrust markets for multiple reasons. In the United States, the unequal distribution of wealth causes people to question the fairness of markets. They see millions of Americans in poverty and question the benefits of a free market system and encourage more government intervention. 

On the other side, many people are vehemently apposed to any government intervention. They believe that even in a crisis, government involvement would do more harm and disrupt the markets, rather than benefiting the economy.  

In regards to this debate, I fall somewhere in the middle. I believe that a market economy is the most effective method to developing a strong economy. However, in times of crisis, government intervention through fiscal and monetary policy can be vital to jump-starting the economy and initiating an expansion as long as the policies are short term. The government also can play a role in providing support for those in poverty and helping them better their lives. Lowering the poverty rate would strengthen the middle class which is an essential aspect to any economy. 

Market rules are essential for a market-based economy. "Only when the informal rules are supplemented by some formal rules can a market reach its full potential." An important regulation necessary in markets is limited the amount of risk banks can pursue. In addition, instilling rules that promote more openness in a market is also essential. Asymmetric information can lead to an inefficient market and played a role in the financial crisis of 2008 when mortgages from borrowers who could not afford a home were being packaged into mortgage-backed securities. Had proper information been made available, the crisis may not have been as devastating. There are numerous ways to regulate markets and this regulation is essential to maintaining the functionality of a market economy.