Functionalist Roles of Markets and Misers: Allen & Lee's Defense

Introduction: Perception and Economic Function

People have always formed attitudes toward particular individuals or phenomena in society based on two criteria: the benefits those individuals or phenomena provide, and the potential inconveniences they may cause. This is precisely the central thesis that Candace Allen and Dwight Lee confront and explore in their article In Defense of Markets and Misers. Adopting a functionalist perspective and departing from the prevailing opinion, Allen and Lee argue that markets and misers contribute to economic growth and development — albeit in an indirect manner. The authors employ an economic framework as their primary analytical tool to explain how markets and misers each play a vital role in the development of a nation's economy, particularly in lowering the prices of goods and commodities and increasing consumers' spending power.

The theoretical framework adopted in the analysis illustrates how society's seemingly straightforward, yet critical view of markets and misers shifts when examined from a different perspective. Allen and Lee choose to deviate from the common argument that markets exist only for profit and market dominance. Instead, they provide a functional view of markets as a vital mechanism for compensating for decreases and losses of economic wealth caused by government activity. Similarly, they discuss how misers — though widely regarded as non-contributors to a nation's economy — perform a surprisingly essential function that increases society's purchasing power by lowering the price of commodities. These macro- and microeconomic perspectives, applied to markets and misers respectively, reflect how both serve as "balancing forces" that seek to stabilize the adverse effects of two social components generally considered beneficial: the government and philanthropists.

Markets Versus Government: A Macroeconomic Comparison

In arguing that markets and misers are functional to society — particularly for the welfare of people and the development of the economy — Allen and Lee conduct a comparative analysis of both components against two reference points: the government and philanthropists. At the macroeconomic level, they address the functionality of markets in relation to the broader economy by contrasting markets with government. By focusing on what they call the "bias in favor of politics over markets," Allen and Lee assert that mistaken perceptions about the two persist, wherein the supposed fairness of government and the supposed unfairness of markets are continually reinforced. Contradicting this view, the authors assert that "government activities, although they destroy wealth, are often popular because the benefits are concentrated and the costs are widely dispersed."

This assertion illustrates how generalized beliefs about the benefits of government activities dominate public discourse compared to the seemingly unfair and self-centered approach of markets. Because government activities are concentrated, become visible to a particular sector of society, and benefit that sector directly, they are considered functional and beneficial. Markets, by contrast, follow the simple rule of supply and demand, and their "widespread benefits" are distributed diffusely, making them appear to serve only the financially wealthy. Because the benefits of markets go largely unnoticed while government makes a point of publicizing its activities, markets come to be seen as inferior to government — a perception that distorts their actual economic contribution.

Conclusion: Markets and Misers as Balancing Forces

One factor that emerges as significant and common across both analyses is the role that public perception plays in perpetuating the notion that markets and misers do not contribute beneficially to society. Also insightful is the discussion of how individual motivations are far from being inherently functional or beneficial to society as a whole. This means that individual members of society who are actively involved in the dynamics of the economy are often inefficient participants. Their visible actions — government spending, philanthropic giving — may appear productive but can obscure more effective, passive mechanisms at work.