Are economic freedom and economic efficiency EVER mutually exclusive?

yes. no.

classic example is monopoly power. there are others.

Monopolies are impermanent, and are not inefficient, but rather shift the welfare from consumer welfare to producer welfare (which isn't inherently bad). Not that monopolies are necessarily good, either.

I will qualify my response by adding that economic freedom will only inherently produce economic efficiency when the suppliers are honest, and that honesty is stringently enforced. I would also add that the consumer needs to be rational, but that's not quite right. The consumer votes with their pocket book, and whether they made a rational choice or not is subjective. A perfectly free market is the ultimate democracy.

To the OP, you raise an interesting question:

In my humble opinion, economic freedom and economic efficiency are not mutually excluadable because of the fact that freedom and efficiency are measures of two entirely different things in society, one's ability to make consumptive decisions and the total potential of the entire economy itself.

There is a classic debate in neoclassical economics. Economics is by nature, in its purest sense, the study of the distribution of resources. What approach do we take to creating a distribution that is socially optimal? It depends on what society at large values more. Equity (Rawlsianism) or efficiency (Utilitarianism)? Do we value total societal consumption or the utility of the least well-off individual in society.

There are also many other facets to this debate:

For example, progressive taxes seem socially optimal because they promote equity, but they reduce one's ability (freedom) to consume by making everything relatively more expensive, therefore having distortionary effects and can therefore be detrimental to the economy.

This is why economics is such an interesting area of study, because it combines numbers with human behavior.

Economic freedom hardly ever directly leads to economic efficiency; here's why: economic institutions are rather persistent. Often the institutions in place are not the efficient ones, rather the result of path dependency. Therefor, even with the freedom to change, most often change does not occur. SO I suppose I can see it in both ways. They can be mutually exclusive because you can absolutely have economic freedom (today) but not have economic efficiency due to this path dependency. At the same time, I do believe that if the efficient outcome is achieved it has to occur because of some level of economic freedom (the likelihood of stumbling upon the efficiency seems small).

Far from being mutually exclusive, economic freedom and afficiency are directly proportional. The government should be solely concerned with protecting freedom and totally absent from every other consideration.

Sorry almost by definition monopolies are not transient. Once established monopolies are almost impossible to dethrone without government intervention. Also monopolies are also inefficient as they have no incentive to innovate.

themanontherun wrote:

Monopolies are impermanent, and are not inefficient,

I don't know, nor do I care, if these jokes are attributed correctly. I just like them.

You know Obama's honeymoon is over when the late night talk showcomedians start taking their turns with nasty but hilarious jokes .....have a laugh!!

The liberals are asking us to give Obama time. We agree .. andthink 25 to life would be appropriate. --Jay Leno

America needs Obama-care like Nancy Pelosi needs a Halloweenmask. --Jay Leno

Q: Have you heard about McDonald's' new Obama Value Meal? A: Order anything you like and the guy behind you has to pay forit. --Conan O'Brien

Q: What does Barack Obama call lunch with a convicted felon? A: A fund raiser. --Jay Leno

Q: What's the difference between Obama's cabinet and apenitentiary? A: One is filled with tax evaders, blackmailers, and threats tosociety. The other is for housing prisoners. --David Letterman

Q: If Nancy Pelosi and Obama were on a boat in the middle of the ocean and it started to sink, who would be saved? A: America! --Jimmy Fallon

Q: What's the difference between Obama and his dog, Bo? A: Bo has papers. --Jimmy Kimmel

Q: What was the most positive result of the "Cash for Clunkers"program? A: It took 95% of the Obama bumper stickers off the road. --David Letterman

TCB wrote:

And should the government be more concerned with the former or the latter if they are?

One must of course define efficiency. If you are looking for pareto efficient outcomes, things like monopolies will still be efficient. If you are looking for marginal social cost=marginal social benefit then you are going to end up with a much broader basis for government intervention. Under both definitions, however, we can think of free market outcomes that are inefficient. This occurs mostly in the presence of externalities, think pollution (negative) or number of e-mail users on a network (positive). In these cases the individual agent does not take into account the effect that his or her action has on the welfare of others. Generally in these situations it is the role of the government to establish property rights and facilitate the transaction that promotes the efficient outcome.

Take pollution for instance. In order for the efficient outcome to occur there will need to be either a quota on pollution, which is a rather imprecise method, or the government will have to decide who has the right to clean air, water, etc. Does the company have the right to pollute and the rest of society must pay them not to? Or does society have the right to a clean air and the company has to pay them in order to pollute? The Coase theorem hypothesizes that the efficient outcome will occur in either case so the decision then becomes a matter of values.

I don't know why there is a quote in the above post, my apologies.

BTW I think this is a great question.

Of course economic freedom and economic efficiency can be mutually exclusive-- especially in the short term.

Ever heard of mercantilism? Why do you think the US is complaining so loudly about Chinese manipulation of the currency? Heck-- look at the growth rates in the Soviet Union and Eastern Europe for the first generation or so after the war-- with central planning, they far outstripped what they would have been otherwise and were even higher than growth rates in the West.

The most efficient and effective form of government is an enlightened dictator. The problem is that, over time, it becomes really hard to ensure that your dictators are enlightened.

Eh..... wrote:

If you are looking for pareto efficient outcomes, things like monopolies will still be efficient.

I like most of what you said, however I'm pretty sure that moving from a monopoly to a more competitive market can increase the size of the pie, and through transfer of resources everyone can be better off than they were in the monopoly state (thereby showing that a monopoly is not pareto efficient, as long as transfer costs do not exceed increase in the pie). Just trying to recall what I learned in my phd coursework....

Everybody know that NBC late night is positioning itself as conservative/right wing so as to hold its own against the likes of Stewart/Colbert and because their audience is made of mostly old people. It is no wonder that the majority of your so called "hilarious jokes" emanate from NBC.http://thecaucus.blogs.nytimes.com/2010/11/01/parsing-both-red-and-blue-in-late-night-tv-humor/?scp=2&sq=nbc%20late%20night%20conservative&st=cse"They might be funny, but the late-night TV hosts are just as partisan in their jokes as the politicians they make fun of.That’s the conclusion of a study by the nonpartisan Center for Media and Public Affairs at George Mason University, which calculated the percentage of jokes that comedians aimed at Democrats and at Republicans this year.Jon Stewart, of Comedy Central’s “Daily Show,” and David Letterman of CBS’s “Late Show,” tend to single out Republicans and conservatives, while Jay Leno of “The Tonight Show” and Jimmy Fallon of “Late Night,” both on NBC, more often take aim at Democrats and liberals, the study found.“Just as conservatives get their political news from Fox and liberals from MSNBC, conservatives are getting their political humor from NBC and liberals from Comedy Central,” said S. Robert Lichter, the media center’s president."

how efficient was the financial crash we just experienced?

jjjjjjjj wrote:

how efficient was the financial crash we just experienced?

Not very, but it would have been a hell of a lot more efficient if the government had allowed businesses that made bad loans to fail.

Eh..... wrote:

BTW I think this is a great question.

Thanks. I ask this because Tea Partiers, Libertarians, and some Republicans have become enthralled with the idea of economic freedom and have pushed positions, like opposition to health care reform and cap and trade, and support for low/no taxes towards that end. Yet economists have shown that these policies do not lead to a maximization of available resources (even when traditional measures like GDP) since individuals to not act rationally when it comes to their health, or their energy consumption, or to their spending habits and thus it is optimal for the government to impose some market distorting measures to correct for human's inherent behavioral shortcomings.

Ronnie Brown wrote:

For example, progressive taxes seem socially optimal because they promote equity

I disagree with this particular part of your post (although it was, in general, intelligent and well thought-out).

I'd argue that progressive taxes only seem socially optimal to those whose philosophical beliefs suggest that equity is more important than freedom. More specifically, when we talk about equity in this sense we are talking about equality of outcome, and not other types (such as equality under the law, and so forth).

To some great extent, the root of a lot of political discourse in this country (and the world) is disagreement about the proper mix of equality (of OUTCOME) and freedom. The two probably exist on a continuum, where you cannot have freedom with perfect equality, and you cannot have perfect equality with freedom.

My own personal belief is that freedom is more important than equality, and that you can achieve a high level equality by protecting freedom, but that it does not work the other way around (protecting equality reduces freedom, especially economic freedom).

themanontherun wrote:

Monopolies are impermanent, and are not inefficient, but rather shift the welfare from consumer welfare to producer welfare (which isn't inherently bad). Not that monopolies are necessarily good, either.

The surplus gained by the monopolist is less than the surplus lost by the consumer.

A monopoly is only a bad thing if it is a coercive monopoly. A firm who accomplishes the almost impossible feat of achieving a monopoly on a free and open market is deserving of the highest praises.

kartelite wrote:

Eh..... wrote:

If you are looking for pareto efficient outcomes, things like monopolies will still be efficient.

I like most of what you said, however I'm pretty sure that moving from a monopoly to a more competitive market can increase the size of the pie, and through transfer of resources everyone can be better off than they were in the monopoly state (thereby showing that a monopoly is not pareto efficient, as long as transfer costs do not exceed increase in the pie). Just trying to recall what I learned in my phd coursework....

Well if you're throwing out the phd on me than I have to concede, haha. But I'm not sure you are correct. If you think about it, the monopoly price/quantity is set because it maximizes profits. Since it is a maximum (and with most demand and supply equations, it will be a unique maximum) moving the producer away from this point means a loss in welfare. I have been trying to draw the curves and it seems like the producer surplus is greater in the monopoly situation for basic demand/supply curves. You are correct though, the competitive price/quantity increases total welfare, however, I think that the excess goes to the consumer when moving from monopoly.