The View | Why markets matter more than money
To function well, they need the state to protect private property rights, uphold the rule of law, maintain a level playing field and ensure free entry
People often see money and markets as the same thing. When moralists complain about the corrupting influence of money, they are confusing the two. What they are actually complaining about is the growing influence of markets over our lives.
Economics is mostly about markets and prices, not money. In economics, markets are institutions or platforms where exchanges take place, while money is a medium of exchange and a unit of account. Most propositions in economics do not depend on whether money is used in the market.
Prices coordinate market exchange and production activities by first determining who gets to use the commodities that are exchanged, and second, directing commodities to their most valuable use.
Many activities in our lives are organised through markets. While a person may value a commodity more than its price because of such reasons as rarity or memories and feelings attached to it, the production and exchange of fruits, garments, cars, and millions of other commodities are delivered through the market, with obvious exceptions.
Knowing when and how to be coercive, and when to be constrained, is essential for good governance
School and university places are seldom allocated solely through markets, but are typically rationed through competitive examinations and assessments, and tuition fees are charged together with the provision of scholarships for those without means. Medical care in most places is organised through hybrid arrangements that combine both market and non-market mechanisms to deal with risk-sharing and ability-to-pay issues. There are many more such examples.