Government and Markets
Government and Markets
Chapter 4 begins Part II of the book by arguing that neoliberalism is too narrow a view of the economy. Further, neoliberal economics has damaged, rather than fostered, strong competitive markets. The fundamental theme of the chapter is that markets cannot exist without government support. Government sets and enforces the common law rules necessary to define, protect, and exchange property. Government regulation also exists to protect the fundamental structure of capitalism such as the financial and monetary institutions needed for liquidity and needed to combat macroeconomic forces such as inflation, recession, and the like. The chapter, through numerous examples, explains both the virtues and flaws of markets and explains the necessary role that government plays in protecting the capitalist markets that produce strong economies.
Keywords: capitalism, markets, economics, homo economicus, market psychology, market processes, Coase Theorem
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