Market economics misunderstoodby John BallantyneNews Weekly
, December 12, 2009
Dr Garrick Small's review of John Médaille's book, The Vocation of Business: Social Justice in the Marketplace
. (News Weekly
, November 28) is good in parts and rightly highlights the need for more ethical behaviour in the marketplace.
However, Dr Small's review contains a couple of serious errors.
He alleges that the 18th-century father of modern economics, Adam Smith, "succeeded in turning greed into the key virtue driving economics".
Smith did not. In fact, he said quite the opposite. In his neglected classic, The Wealth of Nations
(1776), he denounced what he called "the mean rapacity, the monopolising spirit of merchants and manufacturers who neither are, nor ought to be, the rulers of mankind".
A second error is where Dr Small asserts: "Market economics assumes perfect market competition".
Perhaps some unbalanced libertarian ideologues might think this way. However, the standard undergraduate textbook's treatment of market economics is to examine four models of market behaviour, of which the simplified model of perfect market competition is but one.
The other three are monopoly (market domination by a single seller), oligopoly (market domination by a very few sellers, such as Australia's "big two" supermarkets, Coles and Woolworths), and monopolistic competition.John Ballantyne,