prosperity for all the free
Excerpts from Bleeding Heart Libertarians “Why Free Markets.”
. . .the problem we face when try [sic] to “construct” an economic order is how to best make use of all of this knowledge, which is dispersed, contextual, and often tacit. His answer was that the price system enables us to make use of the knowledge possessed by others, even when those others cannot articulate or put into statistics exactly what it is that they know. Our acts of buying and selling cause prices to change and enable those prices to serve as surrogates for the underlying knowledge. Without directly accessing others’ minds, we are able to have some knowledge about what they value that, in turn, enables us to allocate resources in ways that match those valuations.
Mises and Hayek also argued that because this knowledge is structurally dispersed, contextual and tacit, it cannot be aggregated by government planners and regulators (nor, it’s worth noting, by private actors). The only way to make this knowledge available to others is in surrogate form through the price system.
That quote is a classic example of the “I don’t know” theory. Since we cannot know the underlying knowledge of the economic system, we let prices do their own thing. We’re not smart enough to self-regulate, therefore, let the market run willy-nilly on its own.
Without the ability to make reliable decisions on the objective merits, self-interest will slowly dominate. Regulators will try to serve the needs of those who will keep them in power and supply them with healthy budgets. So-called “Capture Theory” explains that it then becomes easy for regulators to be “captured” by the industries they regulate and then regulate in ways that favor the industry.
As long as the state regulates, the possibility of private profits will lure with those with power and resources into that game and it’s a game they will inevitably win. And the losers will be those without the power and resources. Free markets don’t give us utopia, but I really do believe they do better by the poor than do regulated markets for the reasons I’ve outlined.
A sparkling example of the “I give up” theory. Since laws and regulations meant to remedy inequitable and unjust behavior have historically been subject to resistance and reversal, then there’s no reason to try. Just let people be free. Free to be unjust. Free to discriminate. Free to exploit. The rich will win out every time anyway, so let them have it all to themselves. Of course, no actual statistics back up his claim, “but I really do believe [free markets] do better by the poor. . .” He can believe whatever he likes, even after he points out many of the pitfalls of a carte blanche free market. He can deliberately ignore the horrific treatment of employees by the industrial robber barons of the 19th/early 20th centuries, a time when there was much less regulation. He can choose to ignore why we established child-labor laws, or why the 40 hour work week was put into place, or why sick leave, paid vacation, maternity leave, and work place safety laws were adopted. All regulations established to help equalize disparities. The recent domination of the marketplace by the middle class was not accomplished via an unregulated, laissez faire, libertarian free market; it grew out of good law and good policy.
Free market advocates also clam that minimum wage increases will cause higher unemployment among the low-skilled workers—just the population it’s supposed to help. It’s easy to see why. Employers push back by cutting jobs. Being understaffed hurts the company, but it’s only minor and temporary. A big company has the resources to weather a short term inconvenience, but the poor are effected immediately. They haven’t the reserves to get them through an interruption of their income. Soon they capitulate and accept any job at any pay. The rich have the fulcrum set to give them the leverage. The poor never have a chance. An example of poverty being created. It also sidesteps the number one reason for increasing minimum wage. The minimum wage employee lives hand to mouth spending every penny they earn. Double their income, and they’ll still spend every penny. Think of what that’ll do for retail sales. The rich, conversely, can’t begin to spend everything they take in or have. Increase their income and very, very little of it makes it to the marketplace.
It’s the free market that has driven technology and given us more choices for less.
Oh, and here we have the “money drives innovation” theory, along with the “free market gives more choices” theory. Inquisitiveness, the desire to know, the desire to understand are what drive science and technology. They are the real motivators behind learning and progress. Greed only drives getting more of other people’s share. Choices? Free markets do give us abundance—and redundancy—and waste—and lots of unnecessary junk. And it gives us choices based on greed rather than need. We don’t need more, cheaper choices; we need better choices.
This begs a few questions. If the rich game a system under regulation, what’s to keep them from gaming a system without regulation? Since the rich are gaming the system, how is their free reign over it better than independent, external regulation? If a free, unregulated market is the only viable market, why do we tolerate a market where the rules are made for, by, and favor the rich? How can the market be free when it’s regulated by the rich?
“An unexamined life is not worth living,” as Socrates once said.
An unexamined belief is not worth believing. These are only a few of the arguments made to justify the unjustness of an unregulated economic system. But to rationalize without rational thought, to argue without thoroughly examining the proposition, leaves the argument unreasoned and confounded by false assumptions. Belief needs substantial, verifiable support to be real, free faith. I would have faith in a free market if all the players were fair and honest. I would have faith in a system of complete anarchy if every one of us treated everyone else with equal respect and kindness. We would not need laws or regulations, rulers or police, borders or armies. A truly free market would not only “do better by the poor,” there wouldn’t be any poor.
Since all the evidence we have of current human behavior, and all the historical evidence on record decisively shows us a world incapable of acting with respect and kindness, fairness and honesty among all the players, a truly free market is untenable. Free market advocates would never stand for anarchy on Main Street, but somehow, by some twist of logic, they insist on having anarchy on Wall Street.
Listen to part 1 of the BBC podcast [Does Money Make You Mean?].
Related post [Competition Makes the World Go ’round].