Here is a comment of mine from another Facebook thread where a friend and I were discussing the awfulness that is Argentina’s populist regime (headed by Cristina Fernández de Kirchner). The focus of the discussion was the government’s latest “supply law,” which entails a number of price controls. While I agreed that the policy in question is ill-considered, I noted that corporations also administer prices that largely amount to extra-market controls. He then asked me if I believe corporations operate outside the market. I responded with the following…
It depends on what you mean by “the market.” Many private corporate actors, when setting wages and prices, are constrained by neoclassical forces of supply and demand about the same degree by which the state is constrained. I’m thinking of monopolistic or oligopolistic sectors, which make up a sizable portion of the American and global economies in the 21st century. In other words, we’re not talking about perfectly competitive (or even highly competitive) markets here.
Truth be told, a perfectly competitive market has never existed, and the United States government (like the Brits before them) has followed a mercantilist (not a laissez-faire) playbook for the greater part of its history, especially during its formative years. A number of our most lauded economic historians argue that it was largely the United State’s industrial and state capitalist policies (a la Alexander Hamilton) — much of which involved a range of controls and interventions in wage and price markets — that accounted for her unprecedented growth prior to WWI, and it was largely Latin America’s relative laissez-faire approach in the nineteenth century that accounted for her relative developmental “backwardness.”
After the Civil War, and especially by the 1880s, the United States shifted from a majority proprietary/agrarian/yeoman market to a corporate capitalist one. I could go on and on about this transition. In the meantime, I’ll just insist that Say’s law (as well as more sophisticated neoclassical notions of supply and demand) was then rendered even more theoretical and otherwordly.