Thursday, January 26, 2006

Testing, Testing, Testing New Words

I'm cranking away on the draft paper that I described earlier under another name. I now call it "The Prediction Exchange: Progress in Promoting the Sciences and Useful Arts." More about that anon. Right now I have a simple terminological question: What do you think of "market weakness" as a description of a systemic inefficiency not so terrible as to qualify as "failure." Google ("Now with 80% more Evil!") shows "market weakness" widely used to describe, say, a wobbly stock market. I mean something a bit different: market failure lite.

On a purely-for-fun front, try out "philosophomoric." I thought I might have coined it, but Google shows that others beat me to it (as well as variously hyphenated variations). Still, I like it. It rolls off the tongue nicely and tickles the ribs.

Ditto another word that I may really have been first to use: "illiterally." To me, it means "exhibiting the level of literacy evinced by people who use 'literally' to mean 'not literally but forcefully.'" The Devil's own search engine (Ha! Just kidding. But I bet saints have stopped using it.) shows other, subsequent uses.

10 comments:

Ben said...

I like the term myself but it would help if you would give us a few examples of what falls in the market failure category and what would rather be a market weakness.

Also I think that makes Agoraphobia close to its maximum quota of English neologisms. I mean, a single blog can't be responsible for too great a share of the English language evolution.

Great post BTW it was a pleasure to read.

Tom W. Bell said...

Thanks, Ben, for your advice and kind words.

Following the advice, here's the particular application I plan for "market weakness": The relative inefficiency of copyright and patent law, contract law, grants, and prizes in promoting basic R&D. Those institutions garner us some basic R&D, I grant. So I think "failure" would be too strong. But I think they under-perform relative to the positive externalities available.

Glen Whitman said...

The problem, of course, is that economists have used the term "market failure" to refer to any deviation from perfectly efficient results. A positive externality is considered a market failure not because the good in question doesn't get produced at all, but because it gets produced at an inefficiently low level.

I agree that "failure" seems a bit strong to describe a situation where the market merely works in an imperfect fashion. But it's probably too late to get people to adopt your new terminology, especially since "market weakness" already has the alternative sense you mentioned. But how about this: "market failing." It's close enough to the original terminology that it wouldn't require a major shift, it doesn't already have another meaning, and the word "failing" (as a noun) generally conveys a drawback as opposed to a total disaster.

Also, as I noted in a long-ago blog post, the term market failure is already a misnomer because of its implication that the problems identified (externalities, public goods) are somehow unique or especially common to market contexts, when in fact they are even more rife in other contexts.

dgm said...

does this mean you've given up your effort to convince everyone to use "liberal" to mean "classical liberal," and that you are instead focusing on creating new words?

Tom W. Bell said...

Glen: I figured, having pegged you as a sensible and informed fellow, that you would say something along those lines. Query, though, whether in a *law review* it would be worth my while, rhetorically speaking, to explain and use "market weakness."

Another possible objection: I'm not describing the market alone, but a combination of statutory rights and market exchanges.

And here's a related problem: What do you call a failure of the legal system? "Legal failure"? But "legal" is not a noun. "Law failure"? Ugh. "Legislative failure"? No; regulations are to blame, too.

dgm: Neeeever!

Ben said...

I don’t know. « Market failing » is confusing as to whether it’s the progressive verb form or the noun form of _failing_. It tends to sound as much as a process as a state of the market. (“Look at the market failing! It’s failing!” *loud windy gasping*). I like _market weakness_ better.

“The problem, of course, is that economists have used the term "market failure" to refer to any deviation from perfectly efficient results.”

This made me think and I’m just curious here. Is there any way to measure the amount of failure or failure potential in a market? Do you economists have something like a failure scale, a way to determine which configurations tend to or do fail less between two? I’m not too sure what mathematical principle this would rest on, maybe some concept of entropy from information theory? I’m thinking something like entropy or cross entropy relating a demand distribution and an offer distribution?

Lynne K said...

Tom,

You know I'm a pedant, but I tend to be of the "markets don't fail, they fail to exist" camp. Thus I hate the phrase "market failure", and try to avoid using it. I prefer to think of it as the presence of transaction costs that prevent markets from arising. When you think of it that way, you see it as a continuum, not as a binary fail-don't fail issue.

That probably doesn't help, though, because I have yet to come up with something shorter than "transaction costs prevent parties from creating all of the possible gains from trade and innovation." That's a mouthful.

Ben said...

Lynne,

Isn't there much more to it than transaction costs? What about monopolies, information barriers, isolated indivituals (in time or space), costly market oscillations (that raise the number of transactions) and other dynamics phenomenons, price discrimination, externalities, and of course the Tragedy of the commons?!

Tom W. Bell said...

Lynne: In other words, it's not a failure, it's a challenge. Or, on an even more optimistic note, we could call them, "market opportunities"! But--all kidding aside--you raise a good point. The problem isn't what markets do, it's what they have not (yet) done.

Still, it seems worthwhile to distinguish between cases where markets simply have not developed (say, because transaction costs remain too high under extant technologies) and where they have been stymied (say, because of regulation). Maybe we could call the former a "market gap" and the latter a "market ban." I'm sure academics would prefer fancier terms, but you get the point.

Jeff Brown said...

What's so evil about Google? Is it more than the robots reading your mail?