Creative Response
In the spirit of my new blog, I thought I might discuss how the economic concept of creative response relates to Informationalism.
Creative Response is basically when the rules have been changed to create inefficiencies in a market. For example, an industry is excessively regulated to the point that it cannot supply the demand for its good. The response: black markets!
Take the War on Drugs for another example. Creative response is a perfect reason for the failure of the war on drugs. There is, of course, a demand for drugs. Our harsh drug laws have not eliminated the demand for drugs, they have only restricted the supply. When you restrict the supply, the prices increase! Thus, by not addressing the problem of the demand for drugs and trying to destroy the supply, our government has fostered the black market creative response that has made drugs a billion dollar black market.
You may ask, how on earth does this relate to Informationalism?
As I've stated earlier, the free flow of information is a prerequisite for the establishment of perfect competition and the resulting pareto efficiency. Without Informationalism, we cannot have perfect competition and thus inefficient markets become the rule and not the exception. If we wish to remove the need for creative response which yields billion dollar black markets that cost lives and money, then Informationalism must prevail.
4 comments:
This coincides with the economy in general and how it is falling apart under the guise of non-existence.
Thats a Great post Octavion.............I said basically the same thing this past Friday.
To often the repugs wail about free markets and regulation and what they fail to see is we dont truly have free markets if powerful Oligopolies are virtually unregulated..........there is a HUGE difference between excessive overrestrictive regulation and neccessary and beneficial regulation and the repugs LOVE to blur that line and muddy the waters.
That is absolutely right Mike. Oligopolies often try to use the idea of a free market as a smoke screen to cover up their imperfect competition. The fact is, the rule of law is required to get close to perfect competition and thus regulation IS required. Woe unto those deregulators, they don't understand the full scale of the problem!
Those free markets have caused Delta Airlines to offer buyouts to 30,000 of its workforce and plans on reducing services.
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