Like most of the important results in mainstream economics, the prize-winning work in mechanism design is very elegant mathematically, and offers many counterintuitive results â€” yet it has precious little bearing on the case for (or against) laissez-faire capitalism. Those who think otherwise are relying on a simplistic and naÃ¯ve view of how the market and government actually operate. Before arguing this point, we should first review some basics.
For those who equate “the free market” with “atomistic individuals who reduce everything to money,” it is obvious why the insights of mechanism design appear to impugn pure capitalism, and to justify enlightened government tinkering with spontaneous outcomes. Yet this view relies on a false caricature of the market economy, and a naÃ¯ve faith in political action. FULL ARTICLE