Why Markets Aren’t Natural with Chris Hughes | Capitalisn’t Clips

I think, you know, we have this cult of the free market, this idea that supply and demand determines everything from the price of pizza to how much you're going to pay ChatGPT to use its technology. And in reality, what we see is that most major markets in the United States are, if not managed, at least structured by the state directly. So, banking and finance is an obvious one, one that's close to my heart in my own academic interests, healthcare, pharmaceuticals, airlines, I mean, we could keep going through the list of industry after industry. If you add them up, you're well over half of GDP. And so, my point in writing Market Crafters was not to say that structuring markets is always good. It's just, hey guys, we do this. These markets are not mythical and self-regulating. We got to learn how we succeed and how we fail so that we can do it better in the future.

When you see public policy makers managing and guiding markets towards a public goal like making Americans richer, making their financial lives more stable, future proofing against climate, that is market crafting. So I go through all kinds of successes and failures in the book. The upshot is that when we succeed, it tends to be because we invest an institution as you were saying with a clear mission. So for instance, the Fed has a clear mission, price stability and full employment. We give them a lot of power to do it and then we give them the discretion, the bit of insulation from the ups and downs of the political cycle to succeed. And so that story, listen, these institutions still fail. The Fed is clearly not perfect. But on balance, when we invest institutions with that kind of model, they're able to deliver on things like price stability, financial stability, and other bigger picture goals. But the problem is we tend to avoid creating these institutions in the first place. This fear of centralized power particularly in economic policymaking means that the markets often don't work the way that we want them to and there's no one to hold accountable because there's no institution responsible for delivering.