DeLong Smackdown Watch: Yes, I Have Been Making This Same Mistake Since I Was 18 Edition
I wrote:
What Do Econ 1 Students Need to Remember Most from the Course?: This is where the market economy comes in. Let us assign each newly-produced commodity a particular person. Call this person the "owner." Let the owner decide who is going to get to use the commodity. Let the owner exclude all others who from using the commodity. And let the owner charge the designated user he or she has decided upon a "price" for the right to make use of this commodity. This simple institutional arrangement has a huge number of advantages as societal mechanism for planning and coordinating the production and distribution of scarce, rival, excludable commodities.
It solves the problem of production--what commodities we should try to make more of. Individuals look forward into the future...
I can only say "touché" when my teacher Jeff Weintraub emails from UPenn:
[although] that's a very nice job... [which] brings out what is so dazzling, profound, and paradigm-changing about the theory of the market (starting with our friend Adam Smith)... I just wanted to highlight one significant conceptual glitch that I see in the first post, even within the analytical framework you're presenting. In laying out the virtues and achievements of a working market system, you start with this one:
It solves the problem of production--what commodities we should try to make more of.
Actually, it doesn't. As the rest of your paragraph makes clear--or even the part of this sentence following the dash--it solves the problem of indicating the pattern of demand (or, as Smith puts it, "effectual demand"), thus providing incentives for people to produce things that other people want, and to focus especially on producing the things for which there is greatest demand. Someone still has to produce those things... this theoretical framework for defining or framing "the economic problem" largely ignores, or at least takes for granted, the whole problem of production (and the theoretical problematic it would entail). I think it would not be unfair to say that, in this respect, it faithfully represents the central thrust of the whole theoretical tradition running from Smith up through neoclassical economics...
I should change it to:
it solves the problem of incentives--of how to induce people to set to work figuring out how to make those scarce, rival, excludible commodities that demanders most value. Individuals look forward into the future...
