Daily Archives: July 28, 2011

Market failures in Bolivia – Keynes or Friedman?

This cartoon appeared today in El Diario. You can see a door (government) opening and a person shouting “probable increase in fuels!”  A street vendor looks busy with one sign reading “price increases” and other signs for vegetable prices. In practice and in common life, anytime an opinion leader (in this case government’s officials) “voices” anything, it can be misinterpreted. Bad signals or opinions in a market place, do cause prices to go up; can promote price speculation and of course contraband to markets where prices are higher (surrounding countries); thus inflation happens.

Keynes advocated presence of the government in the market place, to avoid for example monopolies. But in any case to cause distress in the free market place; once a price of a food supply goes up, it seldom goes back down. Uncertainty damages the household economy.

More often than I would like, this comparison will appear in other posts of this blog, which will sadly exemplify how Bolivian economy moves back and forth from Keynes to Friedman…