In a recent interview with Prof. Eric Maskin, a Nobel laureate in Economics asserted that “The market is no God – it cannot solve every problem.”He was lamenting the inability of markets to stem or reverse inequality (usually temporary) that economic growth, especially through globalization, sometimes causes.Prof. Maskin could have gone even further and claim that markets do not have the ability to reduce inequality nor to define and purposefully solve any problem.The writer is an Israeli publicist and political activist. He is the founder and director of the Israel Center for Social and Economic Progress (ICSEP).Markets are abstract constructs depicting the exchange of goods and services. Yet they are too often mistakenly treated as if they were living entities that can identify problems and resolve them, even such very complex problem such as inequality (however defined).Markets are also often blamed for human failings, as when greedy behavior which Capitalism has allegedly incited is blamed for the recent financial crises, though they were really caused by a government-created bubble. It is like blaming motor cars for road accidents.The market’s chief virtue is that in a competitive environment it promotes a spirit of enterprise and the most efficient use of resources. Unintentionally, the immense wealth created has transformed human life by liberating most Europeans from disabling poverty.The miraculous creation of freedom has had immense consequences. It has widened the scope and variety of human existence in unimaginable ways. It was probably this unintentional result of market activity that prompted Adam Smith to shrewdly assign it to “the invisible hand.”This was the logical blunder committed by those who attribute to markets a sense of being and of purpose, or the intention and ability to resolve problems. This has caused so many social scientists and philosophers to fall into the trap that Alfred North Whitehead described as “the fallacy of misplaced concreteness,” namely the mistaken inclination to treat abstractions as living entities capable, among other attributes, of volition (“the nation wants,” or “the public demands”) and of defining problems and solving them. This caused great confusion in these “sciences” and encouraged, among scholars and students, an unrealistic infatuation with Utopian ideals that end up disappointing everyone and generating cynicism.Prof. Maskin also claimed that “most policy makers embrace a religious-like belief that the market can and should solve every problem.”As a result, they neglect steps that he believes governments can take to secure greater equality.However, anyone acquainted with the policy community will find it hard to agree with Prof. Maskin.Most policy mavens do not profess anything remotely resembling the blind faith in markets Prof. Maskin attributes to them; certainly not politicians who benefit immensely from increased government intervention.Academicians too, sometimes do pay lip service to the efficacy of markets, but they immediately proceed to list all the putative market failures that require government (namely its experts’) intervention to set them right; as if government ever exhibited a capability to correct any “market failure” (usually generated by government intervention in the first place). Still a lot of academic sinecures are generated by this conviction.Most policy wonks and their media followers think that government intervention is necessary to solve most problems, especially the invented “problems” of inequality; when in fact there is very strong evidence, especially in Israel, that government intervention, namely political favoritism, is arguably the greatest source of inequality. Prof. Maskin correctly deplores the existence in Israel of two distinct economies, one for the rich and another for the poor. But this does not deter market detractors from regularly inventing more “market failures,” and from calling on governments, arguably the greatest “market failure” ever devised by man, to mend them.This is especially galling in Israel, a country disastrously replete with monopolies, whose economy is entirely dominated by politicians, tycoons and bureaucrats, as was amply documented in the 2010 Bank of Israel study of concentration in the Israeli economy.The desirability of government intervention in the economy is an entrenched Israeli tradition. It became sacrosanct among our economists and bureaucrats ever since Prof. Don Patinkin mesmerized his students in 1950 with Paul Samuelson’s dangerous conceit that government could fine-tune an economy.Consider what this policy disposition has done to Israel, a country with arguably the best human capital in the world, that has enjoyed over $300 billion in foreign investment, yet could not provide its capable workers with decent wages because of the dominance of the economy by government-sponsored monopolies and a huge public sector, both with low productivity.This sad reality makes Prof. Maskin’s decision to hail the virtues of government intervention and its putative capacity to correct market failures in Israel, so odd. Israel could best serve as a tragic example of the evils of massive government (namely political) intervention in the economy, even when practiced by our best and our brightest, and full of good intentions to achieve “equality.”Now to the thorniest question of all: What causes economic inequality and what can be done to overcome it, if anything? In Federalist Paper No. 10 Madison observed that: “The diversity in the faculties of men, from which the rights of property originate, is not less an insuperable obstacle to a uniformity of interests. The protection of these faculties is the first object of Government.From the protection of different and unequal faculties of acquiring property, the possession of different degrees and kinds of property immediately results; and from the influence of these on the sentiments and views of the respective proprietors ensues a division of the society into different interests and parties.”Unlike those who treat inequality as an unmitigated disaster (which it is when it is not caused by people’s “unequal faculties of acquiring property,” but by the exploitation of political power), Madison considers inequality a spur to creativity. He sees this as so essential to the progress of mankind that he insists that “the first object of government...”is to protect it. Imagine, inequality must be protected! Unfortunately, it is mostly the grossly underrated emotion of envy (that caused the first murder in the Bible) that makes most people obsess with equality (Nature, less we forget, incessantly creates variety, namely accentuates inequality among all its creations).The worthy goal of assuring equality before the law is confused with an attempt to impose some ill defined “equality” or at least “equality of opportunity” – another dubious proposition – on everyone.Instead of devoting themselves to increasing plenty – which, evenly distributed or not, has contributed immeasurably to human freedom and happiness (and still does to this day in China and India, though with almost total disregard to equality) – people get bogged down in sophistical scholastic exercises, trying to define equality by positing a “veil of ignorance” that is supposed to somehow instruct us (by learning from ignorance?) what “objective” equality is.These equality-obsessed thinkers ignore the simple truth (often misnamed, as Shakespeare put it, “simplicity") that it was the spread of the market economy that liberated much (though not all, of course) of humanity from the worst form of slavery: The slavery of want that has plagued humanity throughout its history, and is still keeping great parts of it in misery and ignorance.Governments have on the whole just hindered this process. Israel, alas, is a prime example.