Until recently, most business people possessed a bedrock of faith in the efficiency, power, and fairness of markets. And a great deal of it was justified. When trade occurs freely, the maximum amount of wealth is created for the largest number of people. There is no more effective social system for organizing people and allocating resources than markets. But while markets are efficient, there’s nothing inherently fair about them.
Yet, many smart people have fallen prey to this belief. For the past two years, John Jost of Stanford University and I have conducted research on peoples’ attitudes toward markets. Our conclusion: many intelligent people are prone to the “fair market illusion.” That is, they have tended to believe – incorrectly – that market outcomes are inherently fair and that the market process of determining how resources are allocated is a fair one.
Author: Sally Blount-Lyon
Source: STERNbusiness (NYU)
Subjects: Economics, Organizational Behavior
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