Lars P. Syll — Sherlock Holmes of the year — ‘Nobel prize’ winner Bengt Holmström

There is no mystery to the "magic" of supply and demand. It is based on scarcity and rationing by price. Of course, those who make the greatest contribution, or who have the greatest endowments, or who can extract the most rent are going to be rewarded with the best selection, and those that cannot command an income for whatever reason and have no endowment will be left with no share. Duh.

The issue in a liberal society is to reconcile social, political and economic liberalism in a way that balances personal freedom, social fairness and the common good. Economic liberalism based on "the magic of supply and demand" cannot do this. 

A self-organizing system based on economic liberalism will result in highly asymmetrical distributional effects based on scarcity and rationing by price in an environment affected by institutional arrangements that result in privilege based on social status and networking, political power, and financial wealth stemming from unearned endowments and rents.

This is not even a workable choice, since it leads to social and political dysfunction that eventually results in economic dysfunction as well, and economic disfunction exacerbates social and political dysfunction.

Lars P. Syll’s Blog
Sherlock Holmes of the year — ‘Nobel prize’ winner Bengt Holmström
Lars P. Syll | Professor, Malmo University