"The market" isn't an independent entity, it's all of us.
In a comment on this excellent EconLog post by Alberto Mingardi, “Phil” writes:
In his book Economics Rules, Dani Rodrik writes: “The hedgehog’s take on a problem can always be predicted: the solution lies in freer markets … Foxes … sometimes … recommend more markets, sometimes more government.” It’s better to be a fox than a hedgehog, according to him.
(I add that “Phil” does not seem to endorse Rodrik’s point.)
I’ve not read this Rodrik book, but I’m familiar with the argument. The argument is quite common. It’s also wrong. Its error is that it incorrectly identifies the set of choices for dealing with problems (and with “problems”).
Rodrik’s argument appears to be the height of reasonableness. “It is dogmatic and dangerous,” the argument’s champions rightly note, “to assume that one solution or one approach is the answer to every problem. Some problems call for the use of screwdrivers, others call for the use of hammers. Only a benighted fool insists on using a screwdriver to hammer in nails and on using a hammer to insert screws. The wise, non-ideological, enlightened, open-minded, reasonable, and scientifically aware person sometimes uses a screwdriver and other times uses a hammer. What could be more reasonable?!”
To say “let the market always handle it” is to warn that using government as a fix crowds out – prevents – experimentation with many other possible fixes.
The error in this formulation is that markets are many tools. Markets are a toolkit with far more tools in it than government has access to. While government has only a few tools – mostly hammers (some sledge), saws, and clamps – the market is filled with many, almost countless, tools. And the market’s tools are much more varied, nuanced, specialized, and creative than are the government’s simple set of tools.
Put differently, to say “let the market handle it” is just a shorthand way of saying “Let whoever is most willing, most able, most experienced, most knowledgeable, and best equipped be free to try his or her hand at dealing with each specific problem.” And to say “let the market always handle it” is not – contrary to what Rodrik’s argument suggests – to propose a single, simple fix for all problems; it is to propose that the field be left open for as many fixes as are feasible to be tried. To say “let the market always handle it” is to warn that using government as a fix crowds out – prevents – experimentation with many other possible fixes.
In short, the choice is not between only two alternative possible fixes: the market or the government. Instead, the choice is between a gigantically large and varied set of possible fixes (the market, with its many detailed specialized carpenters and master builders) or a tiny set featuring one possible fix (the government, with its hammering, sawing, and clamping officials, none of whom – unlike the case with market participants – can be reasonably presumed to know enough of the finer details of any of the problems that they are called upon to ‘fix’).
