Over at Agoraphilia, Glen Whitman has a series of entertaining posts applying economic logic to a number of interesting topics. If you read Glen on a regular basis, than you won’t be surprised that the topics include things like restroom hand dryers and toilet seat signaling. But the post that caught my attention this week attends to more mainstream subject matter. Glen responds to the thesis of Joel Waldfogel’s new book, The Tyranny of Markets, that the market fails to satisfy the preferences of small, idiosyncratic groups with minority preferences. Glen offers a number of responses, all worth reading, but here’s my favorite (followed by #5 and #4):
Waldfogel is committing the Nirvana fallacy â€“ that is, condemning the market because it falls short of perfection. In this case, Nirvana is apparently a state in which all preferences are perfectly satisfied. That option is not on the table. So what institutional arrangement would do a better job? Would Waldfogel advocate having the government force firms to provide more options, despite the inefficiency of doing so (see #2 above)? Interestingly, Waldfogel blasts some market outcomes for how similar they are to the results of the political process! So the argument is that sometimes markets are almost as bad as government? Is this a serious criticism of markets, really?
Craig Newmark, another excellent economics blogger, asks what all this “long tail” stuff is about if the market is ignoring minority preferences? And here’s Justin Wolfers at Marginal Revolution on Waldfogel’s book.