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Thursday, 30 January 2014

Quote of the Day: On Markets. And Black Markets

While contemporary mythology has it otherwise, the market is not a distinct phenomenon: it is what exists when people interact and otherwise voluntarily transact with each other. The broad definition of the market is simply what people (choose to) do when they are not forced to do otherwise. So it is not surprising that even the Soviet Union, “despite” its anti-market rhetoric, fundamentally relied on markets: foreign markets for prices to guide planners’ economic calculation, and domestic black markets for resource allocation and goods distribution according to people’s real needs and preferences. The black market, indeed, was “a major structural feature” of the Soviet economy.
In other words, we should expect to see markets wherever governments fail. Or, to put it more accurately, markets exist where government cannot sufficiently repress or otherwise crowd out voluntary exchange.