Inherent Instability of the Market: Expectations, Increasing Returns, and the Collapse of Capitalism

Author: Michael Perelman
Publisher:
Publish Date: 2003-01-01
Features: As socialist countries were undergoing economic reforms one after another, the United States implemented comprehensive privatization reforms from its education system to its police agencies. Meanwhile, the crises in Russia and East Asia demonstrated that the market economy is not flawless. In the haste to open their economies to gain the benefits of competition, economists overlooked the unstable factors inherent in competitive markets and tended to emphasize the regularity and stability of the economy—blind adoration of the market economy could lead to its deification. Michael Perelman argues that the victory of the market economy is only temporary, as it is based on an unrealistic understanding of systemic risks. He analyzes the essence and causes of the inherent crises in market society and re-examines the fundamental and unquestionable principle of the market economy—the more competition, the better the development of society. He believes that competition only takes effect during recessions and depressions. When competition is fierce, it indiscriminately destroys both the legitimate and the illegitimate, causing severe harm to society.