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Warren Buffet on the failure of the free market system

Now, for something a little more serious.

According to the Freakonomics blog (which I enjoy reading), on the Monday, June 26th Charlie Rose Show, Warren Buffet said that "A market system has not worked in terms of poor people."

mjbigelow of The Entre Blog points out that "Free market theory depends on people being physically and intellectually mobile in order to avoid poverty. The model predicts poverty for people that can’t do that," but then he adds, "so I’m not sure why Buffet is saying it’s not working correctly."

I don't know squat about economics (or is it "I do know squat about economics"?), which is unfortunate, so don't jump on me if I don't make sense here. (Not knowing anything about something never stops other people from pontificating about it on their blog, so why should it stop me?) (I never took Ec. 10 in college, although I probably should have. I was scared of the math. Why am I scared of math? Because I'm a girl and I've been inundated with "girls can't do math" messages since early elementary school. But we can leave that discussion for another time.)

I really have no idea what Warren Buffet said or didn't say on the Charlie Rose Show, since I didn't watch it on TV or on Google Video and don't want to pay $9.95 for an e-mailed transcript.

But from that one quote alone, it doesn't seem that he's saying that it's not working correctly, only that it doesn't work (i.e., it doesn't make money) for poor people. And mjbigelow's statement supports that it wouldn't work for poor people, if we can assume that poor people are not as physically and/or intellectually mobile as non-poor people, and that by "working," we mean "making people money." (I'm using "non-poor" instead of "rich" because I mean both middle and upper class people when I say "non-poor.") Is that true, though? Are poor people poor in a (relatively) free market economy because they lack physical or intellectual mobility? I think I understand physical mobility and why it is important for a free market economy to work and why people who don't have it can't make money--the ability to travel to a different town or city for college, the ability to travel to a different city or state or country for a job, the ability to commute within a geographic area for a job, etc., but what is intellectual mobility? Is that just double-speak for smart? Are non-poor people smarter than poor people? Or were they just given a better start at an earlier age?

This is getting away from the heart of the matter, but how do we measure or compare intelligence if people weren't, for whatever reason, raised with intellectualism as a supreme value? Did the fact that my parents read to me and encouraged my artistic and literary creativity from a young age make me a better student in school? Someone, I think my great-aunt, gave me a diary with a lock and key on Thanksgiving when I was 9, and I haven't stopped writing for myself since then. If someone--someone who valued writing--hadn't given me that gift, would I have written as much as I have? If someone hadn't taken me to the library for story hour and to take out books every Sunday, would I have read as much as I did? Those things, those gifts of diary, time, and chaufeuring, are a luxury that not everyone can afford. Do you need to already be financially comfortable to afford to encourage creative and intellectual achievements? It is true that this country is blessed with great public libraries that are accessible to everyone, but in poorer communities, they are not open all the time. (In my neighborhood, for example, which abuts some very expensive housing as well as several housing projects, the public library closes at 6 pm most days and is not open on Sunday.)

I guess I really wonder why so many people are poor, and what it would take to get them out of poverty. Maybe the free market alone can do it, but not if the free market only works for people who are intellectually and physically mobile. I mean, surely we all agree that from a moral perspective, someone's gotta' take care of those people, but in our fractured, asocial, anti-front-porch society, that doesn't seem to happen within families and other natural community structures. I guess that I am against a purely free market economy, without any artificial intervention by the government, because I don't think that a free market system takes care of poor people, and I think we already know that we can't rely on individuals to take up the slack. Like my good friend Warren said.

wow, Adina,

I really like what you wrote! You spotted his assumption--took "market economies don't help poor people, because market economies don't take into account that some people are not intellectually and phsycially mobile" and spotted the assumption: poor people are not intellectually and physically mobile. Kol Hakavod! debators would be proud! btw, saying "the free market has failed for poor people" is sort of a truism: being poor means, by definition, that the system has failed you. In other words, it certainly hasn't failed for rich people....Either way, the problem isn't the market system--that system is supposed to be as productive as possible, and as fair as possible, not leave NO poverty. Government and charity is supposed to take care of poverty, hopefully in a way that can give them the head start they need in the free markeet--but you already wrote all that! As stephen pinker quoted from some other guy (was it Calvin? I'm awful at names...): no system can be both free and fair, because the moment it's free, people will give their wealth to their children, and then the system wont be fair.

I don't understand how people can be financially independent and claim not to like economics. Of course you like economics, you proved so in your blog! It's like when people say they don't like politics, as if politics and economics are some funny taisting soups that can just be put aside, not the very area that controls militaries, highways, taxes, education, etc. etc. etc.

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