ABSTRACT
Conventional wisdom asserts the existence of important limits to the operation of markets. Even economists who generally champion the efficiency properties of the market readily concede that significant and widespread cases of market failure provide a valid rationale for government policies suspending or modifying the operation of the market. Our thesis in this chapter, building on insights developed in modern Austrian economics, is that if the nature and functions of the market are properly understood, it must be acknowledged that the market never fails to fulfill those functions. In this sense, the asserted “limits of the market” do not in fact exist. We shall, for reasons which will become obvious, refer to these limits (which we are denying) as, “inner limits.” We hasten to add that, as we shall see, this denial of the existence of any “inner” limits to the market does not, by itself destroy the possibility of economically justified active governmental policies. But acceptance of our thesis will, nonetheless, alert us to the searching and challenging questions which must be asked before such policies can in fact be justified on strictly economic grounds.
