Just had a heated debate with my professor over market failure.

Miscellaneous General
1

Wow. OK so class just ended and I had a pretty heated debate tonight. This was the first class of the new semester and I’m taking a graduate course in Risk & Insurance Management with some Russian professor.

So he’s talking about financial models and how they make assumptions that don’t always match reality. Ok, I’m with him so far. Then he starts talking about these assumptions and says they ignore the presence of market failure. So he puts up a slide on the screen and says the market chronically under-invests in areas like farming, small business, education, environment etc. So the government has to create agencies to increase the credit flowing into these industries.

So I said “Hold on, I’m not sure I’m following you. The market is under-investing in farming by what standards?”

He says “The market has historically under-invested in this area that’s why the government has to step in and make up the difference.”

I say, “By having the government step in, isn’t it just diverting resources from other areas in the economy where they are more pressingly needed? And I still don’t see how your making the claim that the market is under-investing in farming, by who’s standards? It seems to me that you are substituting your preferences for those of market participants?”

He says, “If the government didn’t extend credit to our farms, the we would be importing all of our food from Africa or Mexico.”

And that’s when I gave a big Rothbardian “So what?” (Which btw turned alot of heads) “If Mexico can produce food more efficiently I fail to see the problem.”

He says, “Then all of our farmland in this country would barren.”

Me, “No it wouldn’t. It would be put to more productive uses.”

Him, “All you are talking about is theory. In real life things don’t work like that. There is no invisible hand.”

Then he goes on, “Take the housing market, if a lender has a choice between lending to a poor person with a risk of X and and return of Y, and another business with the same risk and return, the lender will always choose to ignore lending to the poor person.”

Me “So then the government subsidizes the poor person and we see how that turns out.”

Him “That had nothing to do with the crisis.”

Me “And so what if a poor person can’t get a loan, they can rent can’t they? By subsidizing them you are preventing capital from making to the areas of the economy where it is needed more.”

Him “How do you determine where it is more needed?”

Me “Profit and loss.”

Him “You are talking about the invisible hand. Every serious economist has long recognized the existence of market failure.”

Then he proceeds to draw a supply and demand graph on the board and shade in the consumer surplus and says “See even here people are willing to pay more for products but they don’t because of the market”

Me “What???”

Him “Even right now there are businesses not lending to people who are looking for loans, this is not an efficient outcome.”

Me “Well there are reasons for that”

Him “No this is market failure.”

And then I let him say a few more sentences and get in the last word.

Anyway, How did I do?

Think the other students learned anything?

2

Zomg people can’t have everything they want its market failureztime!

3

If you really said all of that, then you deserve a gold medal, no.. a silver Mises medal for your heroic and intelligent performance. Those are great responses. You owned him!

4

Yeah, if you articulated all that in such a brief, pressure-filled situation, I’m impressed. As a rule of thumb: whenever you can get someone to proclaim “well, in real life, things don’t work like that”, you’ve probably made the better argument.

Nice job!

5

yeah, you batted that out of the park. the only thing you didn’t do was tell him that market failures don’t exist while wearing shutter shades and a ‘markets clear’ t-shirt.

6

Good stuff, sounds like you didn’t go overboard (which is a good thing). I personally wouldn’t want to get into an extremely heated exchange on my first day with the professor, but it looks like you kept your cool, and did very well. I also recently challenged my professor on market failure. He was talking about pollution and how the government needs to regulate it, but he left out the little detail of property rights, so I called him on it after class.

7

you nailed it.

the only thing you neglected to do was tell him that market failures don’t exist while wearing shutter shades and a markets clear tshirt.

8

Here you should have accused him of appealing to authority.

9

I applaud your articulacy and bravery in defending liberty.

10

Every serious economist is payed by the government to apologise for their failed programs.

11

The comment about “every serious economist” is not even true. Most mainstream economists are simply suffering from some sort of an identity crisis.

12

Bravo. The fact that your argument - if properly written out - was so clear, concise, and articulate during your first class… that’s incredible. I would have been extremely nervous doing that in front of an entire class against a professor. Very impressive.

13

Good job man, keep it up. I need to keep learning more so I can do the same, confidently.

14

Chris,

If that was day #1, it will be interesting to know how day #2 goes. Please keep this fine forum informed!

At some point, though, your grade ought to occupy a higher place on your value scale than proving your professor wrong in a debate, but you must know that already.

I am surprised by the level of economic ignorance in a graduate level class. Did he receive formal schooling in economics in Russia (you said he is a Russian professor)? His arguments are so bad I can’t imagine a mainstream economist would make the arguments he is making.

15

“And that’s when I gave a big Rothbardian “So what?” (Which btw turned alot of heads) “If Mexico can produce food more efficiently I fail to see the problem.””

. It’s always good to follow up the “so what?”, with an added reason / justification. Well done!

Also seems like the discussion wouldn’t have been very long, that’s good - you’ll avoid the “that guy” label. And I think you’ll find, other like minded folks will have noticied from the exchange, appreciated it thoroughly and the remnant will probably seek you out.

16

While that level of economic ignorance inexcusable, in his defense he is a finance professor not an economist. Although, you do have to take economics classes to get a degree in finance, so ya, he must have been educated in the soviet union.

And I’m not to worried about my grade, I’m almost done with the degree and have yet to have any professors undercut my grade because of my views. It takes someone who is real low class to do that and I would hope a PhD with a large salary would be professional enough to assign a fair grade.

I do like the idea of showing up next class with a markets clear t-shirt tho. LOL.

17

Receiving repercussions becomes less likely when he doesn’t know your name.

If he asks, say Murray Rothbard.. >.<

Ludwig von Mises may not be so believable.. (unless you can do a mad Austrian accent)

18

Gotta say, I’m not a fan of Rothbard’s use of the “so what?” in works that were meant to be lasting contributions to scholarship. But in the rough-and-tumble of debate, it works. Good job.

19

Great debate. Not sure if I could be so precise and on point within only a few statements under pressure and time (but I was also able to change a teachers entire teaching strategy with a 5 minute rant about how she has no clue what she’s doing in high school).

I think the use of the “so what?” has it’s place, and was a perfect place to whip it out (I do find it amusing in some situations, it’s like having someone walk into getting slapped in the face). Maybe it could be titled as “pulling a Rothbard”.

20

Bravo, good sir. You’re a better man than I to be able to articulate yourself so clearly under pressure like that. I’m so socially awkward that I tend to really screw up in verbal debates.