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Definition

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Marketization is two-fold, but at its very core, Marketization is simply seeking market based solutions for social, political, or economic problems.

1. The marketized solutions of government and market externalities (seeking market based solutions to problems).

-Here the government seeks to solve market and government externalities with market based solutions rather than government based regulations while. For example the market externality of pollution could be solved by the government selling pollution permits to individuals, groups, and corporations thus allowing the market to "see" the information and "realize" the harm by allowing the market to transmit pollution costs to society.

2. The marketizing of government agencies and branches (competitive federalism, limited government).

-Simply electing politicians is not sufficient for the government to be held accountable to the people. In the market businesses are accountable to the people because of competition. Marketizing seeks to make government agencies and branches competitive to one another where government branches and agencies are absolutely necessary (ie remaining agencies and branches not privatized or liberalized away). Governments that must compete in a "market" will become more efficient and more accountable to the people. For example, a voucher system for public education would make public schools compete with one another thus making them more accountable and effecient.

Marketization and the World...The Theory

Critics of globalization, privatization, and liberalization have deemed that it is unworkable without major government regulations to balance the forces involved. Free Market thinkers like Hayek, Friedman, von Mises, or the scholars within the Cato Institute, believe markets can work with far less government regulation. As they see it, the combination of liberalization, privatization, and marketization ensure that globalization fulfills the promises of peace, prosperity, and cooperation that its liberal scholars and philosophers have promised. Without marketization, government created externalities can distort the information available to the market which in turn makes the market not work as well as it could. This can result in stagnation, higher unemployment, recessions, or even depressions. Marketization is simply the discriptive term for the government helping to put information back into the market to solve externalities rather than regulating to solve externalities.

Without either three of these key ingredients free market theorists believe, globalization cannot solve conflicts, promote cooperation among states and individuals, and work to reduce poverty in the world. Without each ingredient the results of globalization will simply be the concentration of wealth in the hands of current capital owners. Thus we get more of the same rather than progress.

Examples of Marketization

- Milton Friedman offers excellent examples of what marketized government solutions can look like. Friedman's proposed education voucher system promotes competition between public schools (and private) thus creating a market based solution.

Origin

While Nobel laureate Milton Friedman may have been one of the first economists to explain market based solutions in plain language for economic, political, and social problems, “Marketization” was coined in the summer of 2005 by Wal-Mart manager Patrick R. Carlson as a joke explanation to solving problems of liberalization, privatization, and globalization. The term "Marketization" finally brings a catchy and simple phrase to the "seeking of market based solutions".

See Also

• Deregulation
• Privatization
• Liberalization
• Globalization
• Capitalism
• Free market
• Classic liberalism
• Milton Friedman
• F.A. Hayek

• Markets