7 - Soft complicity I: Leaving severe pecuniary externalities unattended

Summary

The market's much-touted ability to allocate scarce resources to their most valued uses is largely due to its price system. By paying attention to price signals, economic actors are alerted to shifts in the economic terrain that require a corresponding redeployment of their resources and endowments. Unfortunately, these constant price changes create gains for some and unintended losses for others. Some of these ripple effects can be so severe as to warrant extra-market ameliorative action from the community. Thus, the third instance of economic complicity is the failure to live up to the moral duty of attending to the more damaging consequences of such price changes.

OBJECT OF ACCOUNTABILITY (COMPLICITY IN WHAT?)

Nature of pecuniary externalities

The market is a remarkable social institution in the manner by which it orchestrates the production and distribution of goods and services in the right quantity and quality, at the right time, in the right place, and with the right inputs. And it accomplishes this by coordinating the economic decisions of billions of economic agents spread over a wide geographic area. All this is possible because of the market's lifeblood – its price system. Market prices convey huge amounts of ever changing information to disparate economic agents in a timely and cost-effective manner. These price signals inform market participants as to when and how they ought to change the disposition of their resources in an optimal manner.