Tag Archives: robert peston

The BBC’s business guru Robert Peston poses the question over at his blog, If markets don’t work, what will? He identifies three recent examples of public authorities – the treasury, the Commodities Futures Trading Commission and Ofcom – alleging that the markets they are being paid to regulate just aren’t working, and that consumers are being overcharged.

Market failure is not a new phenomenon by any means. Even in my A-level Economics I was taught that the ‘perfect market’ quite simply didn’t exist: consumers do not have omniscient knowledge and don’t always behave rationally, barriers to entry for companies do exist, there is rarely complete freedom of decision, etc. Inevitably, therefore, we have been left with a mixed market economy, in which privately-owned and state-run companies co-exist, each bound to some extent by government regulation aiming to protect the public interest in the absence of that ‘perfect market’.

From 1979 until 2008, the pendulum swung in favour of the private sector, what Peston describes as ‘the Anglo-American political consensus of the past 20 years that the markets are normally right’. And then came the collapse of Northern Rock and Lehmans. Since when, says Peston, a ‘new ideology’ has sprung up:

… participants in markets who accumulate the biggest personal fortunes are merely those most adept at predicting the irrational behaviour of the herd. Which probably shouldn’t be seen as any more noble or as a more socially useful form of wealth creation than betting on the 3.30 at Kempton Park.

Where does all this leave us? Peston’s article poses the questions, doesn’t supply the answers (why should he?):