I think it’s useful to distinguish between ‘economic thinking’ as described by your parent, and the current western economic leaning toward market economies. As I understand the comment, economic thinking is a story about adaptive systems, not necessarily a story about unfettered markets.
An unfettered market is the most adaptive system possible: land, minerals, goods, money and labor not restricted in their movement, allocation, or prices. The system responds quickly to changing conditions and reallocates resources accordingly. Prices communicate the scarcity of goods and money (interest rates) and send signals to consumers and producers alike to ration those things with higher prices or to seek alternatives.
Check out the Depression of 1920-21[1] for an example of the economy bouncing back without government intervention.
As soon as you introduce price controls, permitting, licensing, interest rate controls, labor restrictions (age, wage), quotas, or any of the other government interventions in the economy, you introduce inefficiency compared to the "unfettered market."
The primary criticism of markets is externalities not accounted for in prices. This is where free-market environmentalism[2] steps in to argue that that the failure is due to the fact that there is no property in air and water, so you have a tragedy of the commons. Increasing property rights to include previously unowned resources could capture the externalities and begin to correct market failure.
Nice theory you have there. But is there any experimental evidence that free market environmentalism works?
In that case, in place of policy debates in parliament and election campaigns, you now have a big lawsuit going between Exxon and whoever owns the atmosphere, as well as everyone else with an economic stake in our current climate.
As bad as taxes and regulations are, is there any evidence that court battles and lawyers are more efficient? There isn't a nonzero transaction cost to resolving these things. Is it less costly than legislating a carbon tax?
Furthermore, judges and juries are going to be just as vulnerable to Exxon misinformation campaigns as politicians and voters are today. And with the owners of the atmosphere having a direct financial stake in showing that pollution is harmful to their interests, the research they fund would be even less credible than government funded research.
Does accurately estimating and doing the accounting for the externalities get easier or harder in that kind of a system?
