A free market automatically operates for the benefit of the people, since it is operated by the people's demand.

Only if there are no externalities is this even theoretically true.

And in practice, consumers have incomplete information, and are not practically able to obtain the information for a rational decision.

And by screwing up with their incomplete information, consumers learn to make more rational decisions.

(Voters and their elected representatives also have incomplete information; at least consumers don't get to inflict the consequences of their bad decisions on the rest of us. Example: the corn price recently.)

Also: lack of awareness of externalities is one of the ways in which this learning process takes place.

Although also: that said, I do think externality pricing is also a legitimate government function; but that's a whole other kettle of fish distinct from "government incentives".

Sometimes it's better not to screw up in the first place. Externality pricing is mainly what I was referring to by 'set up incentives'.

Well, as for that, if there's a chance that screw-ups will happen, it's better that some people do it and some don't, inevitably, than that the government screw it up for everyone. Better that some people go broke than we replay the Great Depression, sort of thing.

(Of course, so far most governments have been absolutely dire at coming up with externality prices - sufficiently so that I'm hard put to it to come up with a successful example. Certainly their bad record at central planning in general makes me very reluctant to suggest letting them try another variation on the theme again without demonstrating something new other than promises of "This time, we'll get it right!")

Well, a planned economy is different from a free market with government incentives. The free market is great for finding creative solutions, but that could include blatantly immoral solutions unless it is regulated.

Only by degree. And - as per my later claim - I'm in favor of things like safety regulations to prevent immoral solutions. However, I'm very carefully against incentives which will - and careless regulation which may - distort the market in such a manner that the creative solutions we get to our problems may not be the optimal solutions.

Incentives in particular privilege a particular solution before the testing's been done, and sometimes even the design, or the brainstorming, and so you don't get the best results.

Most of the people won't be capable of predicting various affects of their actions - and yes, I'm thinking of externalities here. Most of them will never know if their choice of cleaning products or body care was a contributing factor in their kid getting that horrible disease, and as such, will never be able to learn that their choice was wrong.

Only a small minority of people will be capable of deciphering the effects of numerous choices, and then only if they do careful research. And often the consumers will not be able to get access to this information.

Plus, it doesn't do you much good to learn that had you bought different foods two decades ago you would be okay now if what you have is incurable.

It's the same principle as with raising kids - let them make their own mistakes within reason... let them fail a class or get cheated on, but don't let them get hit by a car or burned in a fire. Some kinds of errors are learning experiences, and others are end-of-learning experiences or have their lessons be too severe, and you have to protect people from those.

The fewer choices you expect people to make, the less they're capable of making.

People should be able to understand issues, go looking for advice - product testers, rating agencies, etc., etc. - grade the quality of advice, and generally cope with life by themselves. The people who can't? Well, they're still learning experiences, but for other people, and if they manage to get themselves killed through inability to cope - well, there go some bad genes/memes right out of the pool. Bonus.

The regulatory regime we have at the moment and seem to be adding to day by day turns people into infants who can't think for themselves.

Reason or die.

Great, but a lot of them don't have the time or money to be able to do that. So, this is another rich get richer poor get poorer situation, and I am still opposed to them. I believe in assisting other people to be independent, rather than putting more obstacles in place that make it impossible for poor people to get an education or survive.

People who are coddled never learn to be independent, which is why the chances of someone getting off some kind of state support plot out as roughly inversely proportional to the length of time they've been on it. Also applies in many apprenticeship situations, and so forth - no one ever believes they're ready to go solo until they have to.

Most of the time, you have to get kicked out of the nest.

+1 Rachel and James

But a free market would have none of those barriers. As soon as there are any barriers like that it's not a free market anymore.

No such market exists of course.

Mr. Young, I don't believe you. I've seen countless children raised wealthy. They became independent. They were eager to go off on their own.

By the standards of the poor, they were extremely coddled. They didn't have to work when they got home from school, so they could do their homework from school. They were given free rides through college, and most of them got great jobs when they finished.

Extreme coddling is actually what I see most often leading to extreme success. At least, that's what you're referring to coddling when I'm referring to it as giving the poor a shot in hell.

So, why should I believe that this isn't yet another poor get poorer, rich get richer at their expense scheme?

@Rachel - word.

@Rachel: And despite a great start, unless they also worked bloody hard to hang on to their position and/or wealth, the whole thing collapses on them. The failure of heirs to wealth to stay wealthy is well documented.

The spoiled children of the rich trend to fail in life, and if you have seen countless children raised wealthy, I find it at least as hard to believe you haven't seen this phenomenon.

As for "a shot in hell", please. There are plenty of people out there who started out poor, made good life decisions, and ended up comfortably off in their lifetimes, without the benefit of the gracious condescension of their self-appointed patrons.

@Alistair this is rot. They don't tend to fail, They tend to succeed.

Otherwise that power base just wouldn't exist.

Come on... you don't really believe what you just said do you?

Actually, I'm the only failure I know of in the raised wealthy set, and that's because of extreme disability. And I'm still alive rather than dead because of my family's wealth. Had we been poor, I'd be dead right now.

The rich have a much better chance. Yes, some small percentage of poor people make it, but often at the expense of other poor people. My father was incredibly poor, and born in 1929, so his family had incredible hardships. And he became a doctor. Partly out of being a genius, partly out of a great deal of assistance by his teachers who got him scholarships he didn't know existed until they told him they were his, and partly because his family had the attitude that the whole family works to help the son thrive - so his sister's responsibility was to help him do well. This wasn't as good for his sister.

My mother was also poor. She earned a full scholarship to a college, she had to turn down because it didn't include anything toward room or board. Her family could only afford to put one child through school, and so the boy was the one. My mother did okay in that she married my father, and my mother's brother became a lawyer.

But it could easily have been a matter of one child ends up okay at the expense of the others. Which is what I generally hear about poor families doing from pure necessity.

But even with the sacrifice of some of your children, the odds are still bad. Without good nutrition and medical care in childhood, you simply have less ability to do well in adulthood. And without time to do homework after school, you simply have less chance of getting a good education.

Rich can afford to lavish food, healthcare, time, and even nutritionists on their kids - the poor can't. The rich who get disabled can buy their kids disability aids, the poor can't. I hover in the middle, with some cookware designed to compensate for vision loss that really helps me manage, but I can't yet afford a power wheelchair that would allow me to go to the grocery store.

But my wealthy peers got to go to one of the best public schools in the United States (which is why in debates about public schools my experiences are constantly discounted by my friends group since most public schools do not provide nearly so good an education), get an easy trip into college, which let them jump right into decent jobs.

The poorer of my friends went to crap schools, learned pretty much nothing in them, and couldn't afford college, they started working early, and struggle from crap job to crap job while slowly, slowly pulling themselves out of such circumstances. Which most of them can do because they're two or more standard deviations above average in intelligence, but it's completely unrealistic to expect from most people.

The ones who succeed are the ones who invest work into it, first, educating themselves to be capable of it, and second, then working at maintaining and expanding their position.

Do you really believe that, say, Paris Hilton would theoretically be capable of running a chain of hotels? Or even of managing her investment in a chain of hotels?

Just look at the number of great moguls of yesteryear and consider how many of their descendants are still great moguls of today. Money destroys people who don't understand how to make and keep it, and then they lose the money. It's that simple.

(Sometimes it carries on for a generation, but there's only so long that hirelings can substitute for talent.)

This is just tosh. There may be a case to say that the most fabulously wealthy people ruin their children... but I don't think even that would hold up.

The upper classes over here can almost all trace their lineage back 1000 years. They've proved pretty able at holding on to wealth.

I don't know many upper middle class people who haven't got where they are through having upper middle class parents.

Go check Burke's peerage to see how well those people are doing.

@Rachel: I'm honestly surprised, but I can accept that. Please take my word for it, though, while my background was not one I'd call wealthy, it was well-off, and I know of plenty of my peers who ended up dropping well down the wealth ladder in their generation, because they didn't understand wealth, how to get it and how to keep it.

They didn't understand that money insulated them from fecklessness, either, until it caught up with them.

In further general, while we're getting into areas here that are outside the scope of any one claim - although I imagine we may revisit them in future claims - if I might make the odd general remark, the two I'd make would be that some of this ties into a previous claim of mine:

http://jyte.com/cl/if-one-cant-afford-to-support-children-without-impoverishing-onesself-one-shouldnt-have-children

which would greatly help with the problem, if properly implemented. And second, when it comes to public education - well, let's say that very substantial education reform, including better public schools, grants to send everyone suited to it to college, etc., or other education suited to them, and so forth is one of my bugbears. It's probably the worst place we - for values of we including all the Anglosphere and probably more of the Western world - fail.

I'm sure some of the wealthy ruin their kids. But I think more kids get ruined by poverty than by wealth. You have to compare, because some parents just can't parent.

And yes, it does tie into multiple issues. And in the US, it ties into a culture that doesn't value education and makes fun of people for doing well and caring about education, which is one of the problems I think is truly hurting the US.

I think I'd have to say a subculture. There are parts of the culture, at least here in Kansas, that place quite a high premium on education - and conversely, back in the Old Country, there was also a substantial subculture that disdained it in precisely the manner you describe. Perhaps a global, or at least a Western, subculture?

That subculture needs to be stamped out hard, though, certainly in my opinion.

You didn't really call up Paris Hilton did you? You have to be kidding me.

Are you aware of the idea of anthropic bias? In general, poor folk fucking up their lives isn't news, unless they kill someone with money. Why, you ask? Because poor people fucking up their lives is so goddamn common.

I'm sorry, Alistair, but I have to disagree with you in the strongest terms.

A free market works for the selfish needs of those with power and disenfranchised those who don't have the power. Have you looked at the history of Latin America in the last 30-odd years — particularly the Southern Cone, where free market economics were forced upon countries that were doing very well under developmental socialist policies?

Whilst I think Naomi Klein massively oversimplifies matters, Milton Friedman did so much more harm than good to the world.

You make the mistake of assuming that people are capable of deciding what's most beneficial to them.

Free market axioms in general make the assumption (foolishly) of perfect knowledge between all participants. This claim is no different.