Economics on the small scale

Monday, April 03, 2006

On Cheating and Cheaters

I just want to focus on one bit from Jane Smiley's, uhm, vivisection (via Brad DeLong):
The unregulated free market has operated to produce a government in its own image. In an unregulated free market, for example, cheating is merely another sort of advantage that, supposedly, market forces might eventually "shake out" of the system. Of course, anyone with common sense understands that cheaters do damage that sometimes cannot be repaired before they are "shaken out", but according to the principles of the unregulated free market, the victims of that sort of damage are just out of luck and the damage that happens to them is just a sort of "culling".

There are just two norms of interaction whether you're the lowest form of worm, or a human being like George W. Bush (sorry, I repeat myself): cooperate or compete.

For any particular interaction, no matter what the details, that's what it boils down to. But when you have multiple individuals with multiple goals, there will be conflict between cooperating and competing to achieve those goals. To the extent that we are not able to resolve those conflicts; we are all, in some way, cheaters.

If the conflict is known, it can be taken into account. But Cheating occurs as competition under the guise of cooperation, or as cooperation under the guise of competition.

Laws and Regulation are all about minimizing Cheating. Regulation is not a panacea, because regulators and legislators can be corrupted into Cheating.

It's often useful to analyze who is cooperating, who is competing, who seems to be cheating, and why ? Who benefits, and why ? Are any of the parties supposed to be regulators, and are they Cheating ?

Applying this analysis to Today's Politics would be like shooting fish in a barrel, but the focus of this blog is Economics on the Small Scale rather than Politics. Not to worry, even just looking at economic matters, you'll be left thinking 'who let Dick Cheney loose on the catfish farm ?'


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