Monday, November 11, 2013


When it comes to free markets I tend to be a flip flopper... or maybe a switch would be a better term?  Sometimes I rant against irrational government interference like subsidies for specific industries or bailouts for giant banks that made stupid bets and other times I demand better and more rules from on high.  I think the reason I end up disagreeing so much with people on both sides of the political spectrum is I really do view both government and free markets as tools rather than goals.  They are both useful but neither produces particularly good results on their own.  The end goal is not government, nor commerce, but rather human flourishing.

It is easy to see examples where either entity causes no end of trouble.  Back in the 'communist' days in Russia the fact that the government controlled production so tightly was a disaster.  People worked building widgets that nobody needed and then lined up for bread because there was never enough.  If they had possessed the freedom to simply open up a bakery and start making bread instead of widgets things would have been much better for everyone.  On the other hand a completely unfettered market will often end up with a giant monopoly that uses price controls, leverage over vendors, and other unpleasant tactics to quash any competition and we all know how miserable an experience a monopoly tends to generate for anyone dealing with it.

What we need is both government and free markets used at the right time and in the right place.  We need governments to enforce that food makers put truthful information about their products on the packaging and we need free markets to decide how much to make and what types.  We need governments to set safety standards for vehicles and free markets to decide what sort of vehicles to make, where to sell them, and for how much.  In short we need governments to mitigate the negative externalities that plague those involved in free markets and to otherwise let markets go and do their thing.

Both entities have value and are necessary but both will create a dystopia if used exclusively.  Just like my toolbox for fixing things includes screwdrivers as well as a hammer, a drill, and a measuring tape my ideal set of guidelines for creating a society includes many tools of which free markets and goverment regulation are two.  Any time somebody says "We should do X because (free markets / government regulation) are good" you should be extremely suspicious.  Neither is good nor bad, just as a hammer is neither good nor bad.  It is a tool and the measure of the usefulness of a tool is the outcome it generates, not the tool itself.

1 comment:

  1. I've been super anti-market recently, but this weekend I had a conversation with an economic historian that convinced me there there is a huge problem with jargon between economists and regular people. In common terms people use the word "market" in an intuitive way and so think of a "free market" as a market without rules.

    But when he talked about a "free market" he was talking about a particular way of organizing the economy which does have rules. The particular purpose of that system is to free individuals to make good economic decisions. Apparently Switzerland, Hong Kong and Singapore and examples of free market economies. In particular we discussed Switzerland's government structure (lots of local power, very little federal power, major decisions are made by direct referendums on local ballots). Of course in Switzerland everyone is required to have health insurance (the result of referendums saying that's what the people wanted) so it isn't what right-wing pundits would call a "free market." To be honest, after that talk I could really see why economists are super interested in free markets - but they really need to pick a different word. (For reference, he described the current USA as "crony capitalism")