Milton Friedman once said that a lack of belief in freedom itself is what supports most arguments against free market economics. It could also be said that most uses of the term “free market” rely on a fallacious understanding of freedom, even by those who do believe in it, especially burgeoning students and future capitalists who equate the technical understanding of “free” in free market with the many other ways in which freedom can be understood. In short, everyone gets it wrong when they make an argument about free markets.
A free market is one in which the players in the market are free from intervention by the government. That’s really it. No other substantial sense of freedom plays into it – only freedom from the government, as in unregulated economic activity.
This is fine and well (actually it’s horrible, but we’re talking about definitions for now), but the problem is when people then associate the term with a robust idea of liberty. Something like, “Having free markets is required to be free and make your way in the world.” Freedom is being used in two different ways in claims like that. One means freedom from government, the other the freedom to live as you like. Even if you think these two senses are related, they aren’t the same, and any relationship requires more argument than simply pointing out that the two words sound the same.
Ignoring for the moment the fact that no market is even remotely free in the free market sense, the idea is like calling a prisoner free because they are freed from annoyance by their nagging mother or oppressive father – in a limited sense they are free from a kind of intervention, but then again, they are bound by another much more important one.
The same thing can be said of supposed free markets. The mega-conglomerates may be free from the government, but then again, competitors, small producers and workers aren’t free from the mega-conglomerates, whose size and power dictates much of what happens in any given market. Think AIG, Wal-Mart, ExxonMobil; they control market conditions and how freely any other participant can operate.
Vice presidents tell managers what to carry in their stores and for how much; managers tell their employees how to sell, what to wear and how to act. Further, their success and failure determines in large part the success and failure of your average Joe citizen, as we are so keenly aware now. In other words, there is no such thing as an unregulated free market – either a government regulates it or big business regulates it. The only choice is between an at least vaguely democratic regulation by government and profit-oriented undemocratic regulation.
Actually there’s a third option: radically democratizing the economic world as well as the political one. But that’s another discussion. At any rate, Milton Friedman was right: arguments against the free market rely on disbelief in freedom. But then, there just isn’t much to believe in the “free market.” There’s no point believing in the kind of freedom that really isn’t.
I agree that there are problems with the arguments made on behalf of “free markets”. The value of a free market is mainly efficient price discovery and relatively quick reallocation of resources to the industries that are most profitable.
If any large player can control a large-enough portion of the market, or gain information that isn’t publicly available, then that makes the same price-discovery and allocation less efficient. The government should definitely ensure a level playing field. (This may be what you meant by democratizing the economic world, but I’m not trying to put words in your mouth.)
I think the danger of government regulations comes when the rules tie businesses down with such strict accounting regulations that they become less efficient. It’s definitely a balancing act that shouldn’t swing too far in either direction.
I support Free Market economics in so far as the supporters are willing to reject Limited Liability Status.
These “Correctionary” pieces are a stupid idea.
Chris: that’s a very interesting idea, however, at some point corporations need to be able to limit liability to accept investment capital from sources that are less interested in the daily dealings of the company. Under which circumstances would you like to see liability increased?
Whatever: what “good idea” do you have that you would like to take the place of this “stupid idea”?
anything.
To be fair, any article is a stupid idea if you can’t read.
haha: ha ha…