The Power of Market Forces: Pros and Cons in the Netherlands

Economy•21 Jul ’23 21:00•Adapted on 21 Jul ’23 21:36 Author: Lisa van der Velde

In the ‘Q&AI’ section in which a question is asked to artificial intelligence, the chatbot indicates that there are supporters and opponents of market forces. ‘You can’t agree or disagree with that answer,’ says Professor of Applied Economics at the UvA Barbara Baarsma.

When the chatbot is asked whether market forces have failed in the Netherlands, the answer is: ‘Some argue that market forces have led to a reduction in the quality of the service and an increase in costs. Others claim that competition has actually led to more efficiency and lower costs.’

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Baarsma says he cannot agree or disagree with that answer, because it reflects the opinion of opponents and the opinion of proponents of market forces in the Netherlands. According to her, the political debate about market forces has a ‘very moralistic content’.

Market forces mean that the market gets to work without the involvement of the government, Baarsma explains. So the basic principle is that all economic decisions, consumption, production, saving and investment are made by individual citizens and companies, and the price then ensures the matching of supply and demand.

‘The market is the most efficient way to generate as much wealth as possible for as many people as possible’

Barbara Baarsma, economist

Policy, says Baarsma, is about what the market itself cannot do and where the government must make adjustments. ‘For economists, market forces have been a neutral instrument for centuries, something you cannot be for or against. But where you can only discuss the possibilities and impossibilities in specific cases.’

According to Baarsma, we should not underestimate the power of market forces. ‘The market is the most efficient way to generate as much wealth as possible for as many people as possible.’ If that market fails, that could be a reason for government intervention. ‘For example, with pollution that does not have a price tag attached.’ But that is not always necessary, ‘because just like the market, the government also fundamentally fails’, says Baarsma. ‘It remains a mixture of market and government.’

2023-07-21 19:36:00
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