Friday, February 02, 2007

When do markets make sense?

When do markets make sense? That may very well be the trillion dollar question. Building on my previous posts (here, here and here) about markets as the new 'exit strategy' for philanthropic action I want to draw attention to this comment from Dennis Whittle:

"Thanks for this wise injection of sanity into the debate on this topic. ... Generating sustainable and equitable prosperity requires a multitude of approaches - large and small, public and private. The key is to ensure easy entry and exit for new mechanisms. ... An interesting question is how can we improve the functioning of this "meta-market" that allocates funds to all types of social and environmental initiatives, both public and private."

This is exactly the question, Dennis. When can markets solve problems? When do we need to tax ourselves to make sure certain services are available? And when do need to rely on the application of private resources for public action? We are moving in the direction Dennis calls for - a time when all kinds of mechanisms are being deployed for social good. The key question we face is how to know what to use when.

This is the mechanistic version (and also the action-oriented version) of the philosophical question that keeps me engaged in this work - what is public, what is private, and who decides?

1 comment:

xb blog said...

Katherine Fulton and I talked about what might be some of the unintended consequences of our success at Goodcapital. Would people look for a market based solution to every social problem? My work in malaria has led me to believe firmly that some things are not subject to market based solutions. the problem with malaria is that the people who die (90 percent of the 1-3 million (estimates vary) are in subsaharan Africa and 90 percent of those are mothers and children 1-5.) the real tragedy is that those deaths don't disturb the economy, the social fabric of society or any other lever that might cause a change. AIDS deaths impact the people who own and run things. Malaria deaths are tragic but not disruptive to power or money. There is no market based solution to get them drugs and insectide treated nets. Other people will have to care and pay for them.They are among the poorest and least powerful people on earth. It's a women's health issue that women with money, in the west have not adopted. The market has clear and persistent failures. Malaria is one of them. Donations, grants and more awareness are needed and will continue to be needed. The market solves some things. Not all things by a long shot. It takes a mix, a blend of all kinds of capital and other support and energy to build the world we want, imho. sorry for the extended rant, but this is something I believe strongly. Market based solutions are just one tool. It's where I know how to work and be most effective, but other efforts, community organizing, grass roots efforts in Africa and awareness of the problem through church, ngo and other means are the way to address malaria.