A little knowledge is dangerous

By Rick Perlstein
April 11th, 2008 - 11:43am ET

Progressive blogger and professional economics student Kathy G is involved in a tussle with libertarian blogger and professional economics know-nothing Megan McArdle over the economic concept of "monopsony"—actually not much of a tussle, because Megan, as yet, won't cowboy up and join the battle, nor even link to Kathy G. The term sounds technical, but Kathy pulls you through the concept with admirable clarity and bite. Basically, the monopsony model is one of the many ways economists, abiding by the most rigorous neoclassical principles, are able to demonstrate that laissez-faire markets, acting on their own, can deliver both unfair and inefficient outcomes. Which opens the door to the conclusion that, sometimes, government intervention makes markets work better and more fairly.