Authors: Ivet Avilés Gil & Íngrid Avilés Gil
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1. INTRODUCTION
In recent decades, the market economy has demonstrated its capacity to allow for extraordinary technological progress and wealth creation, parallely to increasing structural inequality and institutional stagnation. This paper’s aim is to highlight the power of the market as a planner tool while combating capitalism’s weak spots that prevent efficiency in the economy. Drawing on the ideas presented in Radical Markets by Eric Posner and E. Glen Weyl, the text will explore the foundations of market economy to introduce certain reforms in its core.
The central threats to healthy market competition- arguably the cornerstone of capitalism- are a series of interlinked inefficiencies; market concentration, misallocation of assets, corrupted bargaining power in the market, and a rise of new (mainly technological) industries such as AI that aren’t sustainably structured. However, these problems do not demand the dismantling of capitalism but rather its most radical form.
The pages that follow will examine a series of proposals to achieve this vision, including perpetual property auctions, self-assessed taxation, restructured data labor markets, and limits on anti-competitive investment practices. Together, these ideas aim to reimagine capitalism not as a static doctrine, but as a living, adaptable system—capable of delivering both innovation and inclusion.
2. JUSTIFICATION
Our current society presents numerous innovations and developing industries, which we have to yet learn how to properly structure. It is interesting to try and draft how these advances can lead to changes in our system, since one way or another they will have some kind of impact.
In the last 100 years all the topics to be discussed have already fluctuated in their role, that is why it isn’t overthrown to refine them in a theoretical way.
Given the rapid pace of technological and social change, many established concepts require reconsideration and adaptation. Revisiting these topics with a critical theoretical lens allows us to better understand their implications and identify paths toward more effective and equitable structures. This paper will examine several key areas—such as market dynamics, property rights, and labor in the digital age—that have evolved significantly and demand fresh perspectives to guide future development.
The first point to highlight is that hierarchical societies have always existed, and throughout history, laws have been used to address these inequalities in a formal and structural way. However, new loopholes are constantly discovered—or sometimes deliberately created—that allow a new privileged class to emerge. Today, this role is often filled by large corporations and property owners who possess disproportionate economic and political power, enabling them to shape markets and influence regulations to their advantage.
This paper will navigate through how we are to systematically disable these disproportionate privileges.
3. FLAWS OF CURRENT MARKET STRUCTURES
Market concentration
The main weakness of a decentralized market is when it doesn’t act like that from within. When an industry is highly concentrated, either on its demand or supply side, the bargaining power of its agents is compromised, and the choices aren’t decentralized anymore, but concentrated on only one of the two conflicting agents (the monopsony or the monopoly). Concentration of industries has statistically led to an increase in prices, a stagnation of wages, and a large fall in purchasing power, and there are also many methods for firms to follow these practices: collusions, mergers, pacts, and even, as will be explored later on, institutional investors.
The traditional mechanism of antitrust enforcement and regulation is the way currently used to go against concentration of industries. However, there is a downside to this method; first, the logistical and bureaucratic obstacles of long processes to first detect them and later condemn them. Secondly, there is a benefit to the merging of firms, for they cut production cost technically allowing for the new merged firm to lower its selling prices due to its lowered expenses. However, firms do not tend to use this fact to the advantage of the consumer, and instead rise their selling price instead due to their increased bargaining power in the market.
In conclusion, this method is indeed fit for the concentration of industries problem, but does not exploit the market to its full potential, not allowing firms to share technologies, costs, and knowledge.
Ownership incentives and the limits of static property rights
Ownership of goods and assets is the central tool used by capitalism to incentivize its agents to both produce and invest. The economy stands for using prices as tools to represent all economic agents’ preferences, with the idea of allocating resources to those whose utilities are higher. Therefore, it wants to optimize allocation efficiency. Initially, the good is allocated efficiently (if we find ourselves in a competitive market), but its optimal position within a
market can change, and will, in an ever-changing, continuously flowing system. Therefore, to continuously optimize allocation, a new concept of private property must emerge, allowing for assets to change their owner to the highest offering agent at all times. Thus, resources being available in the market, even when owned, to more willing buyers. However, how is a good both owned and simultaneously available in the market? Allowing for collective property with a single user (in meaning of who uses them) (rather than a single owner per se). By dismantling the monopolization of individual goods and ensuring their continual availability on the market, we move toward greater allocative efficiency. Hence, it is arguable that private property is a form of monopolization of assets.
Institutional investors
To keep on with the monopolization of the market, another cause to the concentration of industries are institutional investors, such as index funds and asset managers, since these structurally hold large stakes in mutually competing firms, acting as a form of cartel or oligopoly through what is known as common ownership. This quiet consolidation of control allows them to shape labor policies, pricing behavior, and even regulatory capture through their lobbying power.
Therefore, we are allowing big competing firms to be controlled by the same group of investors, leading to some form of concentration in the supply side of the market, having inefficient outcomes for the economy.
AI and the Exploitation of Unpaid Data Labor
Moreover, the rise of a whole new reshaping industry has and will continue to change the structure of the economy: Artificial Intelligence. Big Data, provided by Internet users, is the fuel for this billion-dollar technology. However, even though this data is unimaginably valuable, labor in this industry is unrecognized and thus unpaid. And since individuals receive no compensation for their contributions, they remain unaware of their role in the industry leading to unstructured and below potential data, resulting in a both extractive and inefficient market.
Because of this, this industry is growing on unrecognised labour from which only a few are benefiting, being another cause for inequality in the economy.
Mechanism 1: Common Ownership Self-Assessed Tax (COST)
In order to address allocation inefficiency, property as we know it is to be rethought. Radical Markets proposes a new concept of property: collective ownership with individual use, where assets are continuously available in the market but its specific use has its highest bidder as the right holder. Under the COST system, property owners must continuously self-assess the value of their assets and pay a tax proportional to that valuation; any other individual being able to purchase it at the self-set price, allowing for ongoing optimal (efficient) allocation.
This way, underused assets live up to their potential by being bought by other individuals who seek to get greater value from it, and misallocation of goods is defeated.
Still, this model’s setback is the trade-off between allocative and investment incentives. The COST optimises allocation but is a disincentive to investment; users are not going to be willing to invest in a certain asset if they can’t be certain that this same asset is not going to be bought off them before the investment can be profitable.
This trade-off is exemplified by the proportion the tax should be to the self-assessed value. First off, the COST’s objective is for individuals to show the true utility that the asset reports to them. For that to happen, the tax proportion must be equal to the asset’s turnover rate, which reflects the owner’s reservation price. When the tax rate mirrors this rate, individuals are neither incentivized to overstate (to avoid sale) nor understate (to reduce tax) the value, thus promoting optimal allocation of resources. However, when the tax rate is held at the turnover rate, it is too high and disincentivizing investment, which is then lower than its true efficient level.
This demonstrates that a pure turnover-based tax rate might distort investment behavior, even if it reveals true preferences. To address this, the tax rate should be adjusted lower than the turnover rate, since the marginal loss in efficient allocation is outweighed by the marginal gain in productive investment, thereby sacrificing a small degree of allocative efficiency in exchange for preserving investment incentives.
The justification behind this fact is that slight mismatches in who owns an asset don’t drastically impact the economy as much as a collective disinvestment—especially if the alternative owner doesn’t value the asset much more.
This trade-off reflects a broader principle: economic dynamism requires not only efficient allocation but also ongoing investment and innovation. COST seeks to integrate both by tuning its parameters according to market context and turnover expectations. By combining both allocation efficiency and not undermining investment we get to reach each asset’s potential in the economy.
As in practical considerations of this tax, if the COST were to be implemented, it would mean that underused land and vacant properties would inevitably return to productive use and to someone who values the potential of the property more, reducing speculation and housing shortages.
Mechanism 2: Reforming Institutional Investment
As has already been explored, institutional investors result in a highly consequential distortion to market competition through common ownership of firms within the same industry. When major shareholders have a vested interest in multiple rival firms, the incentive to compete aggressively—on pricing, wages, innovation, or labor standards—diminishes. The industry holds the structure of an oligopoly.
Proposed Reform: Restructuring Investment Rules
Against this anti-competitive behavior of the economy, Radical Markets is up for a legal reform. Regulation of markets is usually based on the restriction of collisions of firms to avoid cartels, monopolies or oligopolies. Still, the largest form of overlooked concentration is found in institutional investors; since they concentrate ownership of rival firms, and therefore control almost the totality of a single industry.
The way to go around the loophole used by institutional investors is to only allow them holding control of firms across different industries; not within. However, the possibility for small investors within industries should be allowed, since not threatening, as well as for the purely passive investors (that do not hold governance power, or are compromised to mirror voting; voting the same as the others stakeholders).
One of the arguments against this innovation would be the loss of diversification of investors disincentivizing investment overall. However, the true and impactful diversification is already across industries, and the possibility for individuals to invest in different institutional investors still holds.
Moreover, reducing the lobbying power of large asset managers—which often leverage their influence over multiple industries—would further align markets with democratic accountability and public interest.
A potential concern to the legal proposal could be the loss in diversification in risk. However, true diversification is not within industries but across industries, geographies and asset classes, which our legal reform still allows and is up for.
Mechanism 3: AI as a Distributed Decision-Maker
As we started off stating, these proposals do not stand for the abandonment of capitalism. Instead, they require the embrace of its most radical and dynamic form. But why choose a market solution instead of relying on a central market planner? Information is simply unable to be supplied to this central planner in an efficient and fast enough way; therefore, there is a communication and computation issue. The failure of central planning systems throughout the 20th century was rooted in a fundamental limitation: information overload. As Friedrich Hayek argued, economic knowledge is dispersed across individuals and cannot be efficiently aggregated or processed by a central authority in real time.
Because of the dynamism of the economy, there is no way to be able to compute a modelled equation; not even a modern computer is able to concentrate the economy’s information and compute it. That is why the answer has to be in a decentralized computation of the economy. However, with the development of artificial intelligence, distributed computing, and parallel processing, we shall find the answer in a neutral decision-maker that holds all available information in the market and computes it.
The solution must be decentralized computation—a system where individuals, through market mechanisms, collectively “solve” the economic equation in real time. Such a system would not resemble a traditional central planner but rather a decentralized, algorithmic structure capable of integrating vast flows of data to coordinate economic activity more efficiently and justly. Radical markets proposes an alternative solution to market economy; an AI-generated system that keeps the market decentralized but is based on the transfer of decisions to stadistic prediction models (AI). However, it may seem dystopian to think of computers as the ultimate economic system, of course.
What would be the role of AI? One of the theories would be it choosing who consumes what, at what price. This could be based on an often-used system; the machine learning-based recommendation system, which ranks goods based on observed preferences of the user and statistical patterns. This is already being used in platforms such as Netflix and Amazon to recommend titles in which the user can be interested in based on the preferences they have shown and what others with similar preferences have also enjoyed. In the currently used system, it brings to the attention of individuals other items to consume, but only as a suggestion. This shows the possibility that this machine learning algorithm could be used in a more impactful way to let it adopt a role as a decision maker for us. However, the use of this very same system in this specific seems also unrealistic since machine learning is a statistical prediction model based on what it learns from what has already happened, and from which the information has been recollected and later transmitted. Therefore, it may not seem totally applicable in the whole of the economy, since then progress in it would collide. A machine learning system ‘learns’ or observes and detects patterns from situations that have already happened. However, if we start relying in this system to kind of become the market, no new situations could be actually created, since AI is not a thinking program, but rather a replicating one.
Another point to take into account is that relying on AI would also redefine the meaning of individuals as data providers in the economy. Nowadays, everyone contributes to the evolution of AI by fueling information through the internet and social media, which could be regarded as unpaid labor, used to train and feed algorithms. However, this data is provided unconsciously, and usually differs from the actual useful information and its purpose in machine learning programs. By reshaping the industry, paying society for its crucial role in its development, and awarding the rightful information, real advances could be achieved for a much more prepared database and a much more conscious economic planner.
If data providers centered in also sharing their current market information, it is a theory that AI could compute simultaneously the economic data it gathered in an all-knowing, all-variables-including equation, without all the current inefficiencies impacting the outcome.
This way, the very first step must be setting up a system where data-providers are paid for their labour while also ending the lack of effective incentives for them to provide useful information and redistribute the gains from AI. The newly paid labour would also mean the transfer of money from the siren servers to individuals, serving as a redistribution of wealth method that would benefit the population much more than it would harm these siren servers.
Social implications
The integration of AI as a market planner will very obviously imply social and ethical considerations. The first step to build this economy planner would be to feed it with the correct and sufficient information, by first paying individuals for generating this data (as we discussed to be necessary previously). A new labor industry and market structure would grow from something already existing, just by recognizing data as labor. Moreover, it would act as a redistributive mechanism of wealth, transferring value from tech platforms (siren servers) to users, becoming a much more sustainable industry.
Potential threats
Firstly, it is obvious AI should be much more developed to gain this specific power over our lives, and it is quite assumable this level of development could never be reached. That is why a first step of labouring data providers in order to industrialize the growth of artificial intelligence, to ever mark our way up there.
Secondly, it is quite unrealistic to assume we as consumers would ever be willing to surrender to losing our say and transferring it to inhuman decision makers.
4. COMPARATIVE SYSTEMS
To understand the transformative promise of Radical Markets, it seems convenient to contextualize them in retrospect to the historical evolution of economic planners and property rights in the light of a broader spectrum of economic systems—namely, traditional socialism and modern capitalism.
These systems have paved different ways around the core economic goals of reducing structural inequality, stimulating innovation and optimising allocation in order to get the maximum potential out of available resources in a just and equitable manner. Each has also exhibited systematic shortcomings, which have been discussed in this paper.
By comparing these structural reforms and their potential outcomes, we are to theorize the impact that Radical Markets’ proposals are to have in our current society, taking a look at recent history.
Inequality
A centralized economic system with a public ownership of the means of production seeks to eliminate economic inequality with a systematic redistribution. While this socialist model often reduces income disparity in the short term, it also tends to flatten incentives and consolidate power in bureaucracies, which can reintroduce inequality in less visible, institutional forms (e.g., political favoritism, access-based privilege).
Modern capitalism accepts inequality as an outcome of meritocratic competition, with the assumption that the invisible hand of the market will produce both innovation and rising living standards. However, in practice, capitalism often results in persistent and compounding inequality, as capital ownership becomes increasingly concentrated, markets become less and less competitive and wealth is transferred intergenerationally rather than through merit.
However, by institutionalizing mobility and redistributing opportunity, rather than income alone, Radical Markets approach recognizes inequality as a result not of differences in talent but of structural imbalances in bargaining power and access to assets.
Innovation
Central planning often stifles innovation due to the lack of competition and unexisting incentives. When innovation does occur, it is frequently driven by state objectives (e.g., military or infrastructure projects), which can overlook consumer needs or emerging industries. In such systems, the role of the individual is diminished; their marginal contributions to the economy are not directly recognized or rewarded, weakening the link between personal initiative and economic progress.
Capitalism excels at incentivizing innovation via market competition, venture capital, and intellectual property rights. However, excessive market power (e.g., monopolies, patents used defensively) can lead to innovation stagnation once dominant firms emerge, as they prioritize profit over progress. That is, in monopolized industries, the businesses do not have enough incentives to improve what they offer because of the lack of threatening competition.
Radical Markets promote continuous competition and ownership turnover, forcing constant re-evaluation and reinvestment in assets. The COST mechanism, for instance, discourages asset hoarding and encourages productive use and reallocation, theoretically leading to more dynamic and widespread innovation.
However, as has been discussed, if AI was to be given some kind of role in economic decisions, progress and innovation would be put at stake, since these programs are not able (and it is unprudent to think they can evolve in a different directon) to go any further from the information they have seen and have been able to get statistics off in order to make predictions off of it.
Efficiency
In theory, central planning aims for allocative efficiency by distributing resources based on need. In practice, it suffers from information asymmetries and slow bureaucratic feedback loops, resulting in shortages, surpluses, and general misallocation. This inability of single-handedly computing all the information was already discussed before, hence inefficiency is naturally inherent to central planning.
Contrastingly, price signals in market economies are efficient tools to show individuals’ continuous preferences and resource scarcities. However, market failures—such as monopolies, externalities, and common ownership by institutional investors—compromise this efficiency, creating deadweight losses and underutilization of assets.
By modifying market incentives without abandoning decentralized decision-making, Radical Markets aims to harness the informational power of prices while correcting for institutional distortions. Systems like self-assessed taxation allow continuous asset reallocation, improving allocative efficiency even in dynamic contexts. Meanwhile, restructuring data and investment markets ensures more comprehensive representation of value creation across society. Deconcentration of industries now corrupted by institutional investors would lead to the correction of this market failure and promote competition within industries.
5. CONCLUSION
This paper has explored the limitations of contemporary capitalism not to reject its core mechanisms, but to push them toward a more efficient and equitable form. The goal is not to dismantle the market economy, but to challenge its static assumptions and introduce radical, yet feasible, reforms that reimagine how ownership, labor, and competition should work in a dynamic world.
From common ownership models that correct inefficient allocation, to legal restructuring of institutional investment, and the recognition of data as unpaid labor fueling billion-dollar industries—each mechanism introduced here aims to resolve contradictions within capitalism itself. The integration of AI as a decentralized decision-maker, while still a theoretical proposal, reflects the necessity of creating tools that match the complexity of modern economies without reverting to outdated central planning.
We stand at a point where innovation can no longer afford to be disconnected from inclusion, and where the potential of the market must be leveraged not only for growth, but for justice. Radical Markets offer a framework that pushes capitalism to live up to its promise—by ensuring that the tools of value creation are shared, accessible, and continually challenged. If we are to shape the economy of tomorrow, it must begin with rethinking the structures we’ve long taken for granted.
Bibliography
- Posner, Eric A., and Eric Glen Weyl. Radical Markets: Uprooting Capitalism and Democracy for a Just Society. Princeton University Press, 2019.
- Tepper, Jonathan, and Denise Hearn. El mite del capitalisme : els monopolis i la mort de la competència. Roca Editorial, 2020.