12 July 2005

Marketplace of ideas

Billmon puts a well-known metaphor through its paces, and gets a lot of mileage out of it.

The classic Darwinian remedy for this problem is supposed to be the “marketplace of ideas,” in which bad theories and really dumb mistakes (both, in Glassman's case) are weeded out once correct ideas have a chance to prove their superiority. But the marketplace for ideas now suffers from many of the defects that have undermined competitive market theory in general: It assumes all participants have access to the same information at the same time; that risk preferences are symmetrical (that is, fear of loss is as strong as desire for gain) and, most importantly, that no one participant or group of participants has enough market power to permanently restrict competition.

If these conditions ever applied in the marketplace of American ideas, they certaintly don't now.
It appears no mistake is too obvious, no theory too hairbrained, no argument too ridiculous to be taken seriously — as long as it is consistent with the consensus "wisdom" of the punditocracy, which is the consensus of the ruling elite. And the failure of such ideas is no longer punished in the marketplace of ideas, which means the market itself has failed.

But when markets aren't allowed to clear, imbalances may accumulate until they can't be sustained any longer. Then markets may collapse.

Watching the punditocracy spin its ideological wheels these days, it's hard not to be reminded of the later years of the Soviet Union — a nation dedicated to proposition that the marketplace of ideas should never be allowed to clear. As the system declined into senility it, too, became increasingly detached from reality.

Yet another reason why nervous folks like me smell a hint of totalitarianism in the air.

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