Markets — On the good, the bad, and the ugly

...Markets are tools that, relative to the alternatives, happen to have great strengths with respect to incentives, efficiency, and innovation. But they are not perfect; they underperform in the presence of externalities (the un-priced consequences – for example, air pollution – of individual actions), informational gaps and asymmetries, and coordination problems when there are multiple equilibria, some superior to others.

But markets have more fundamental weaknesses. Or, rather, most societies have important economic and social objectives that markets and competition are not designed to achieve. In today’s rapidly globalizing world, the most important of these objectives – expressed in various ways through the political and policymaking process in a wide range of countries – are stability, distributional equity, and sustainability.

Read it at Project Syndicate

Mind over Market
by Michael Spence

((h/t Mark Thoma)

Overall good marks on this, but he needs to study up on MMT here:

Attention is increasingly – and, in my view, rightly – being focused on the role of the state, and in particular on the state’s balance sheet. Experience in developing and advanced countries alike suggests that states with substantial and healthy balance sheets are better positioned to deal with today’s stability, distributional, and sustainability challenges. The benefits are several, including an ability to withstand shocks and mount countercyclical responses, as well as a capacity to recycle income to households during periods like the present, when the share of income that goes to capital is rising (with adverse distributional consequences).