The Moral Superiority Of Free Markets
The age-old battle rages on about the failures of markets and the necessity of government regulation. It seems to me that the argument persists simply because free markets and their participants are held up to the harsh light of reality and compared with visions of Utopian perfection, while government actions and politicians are held up to the gentle glow of warm, fuzzy feelings. As long as politicians use the right rhetoric to show just how sincere they are in their good intentions or moral indignation, results don’t matter.
Results, however, do matter. Political manipulations have real effects that often cause harm. Ignoring them doesn’t make them go away, and blaming them on voluntary commerce doesn’t change the reality.
The glaring irony in most of the arguments against free markets is the selection of examples of failure needing government intervention. Those cited are typically from the most regulated, intervened, politically manipulated industries, such as health care, financial services, and energy. Government promoters call changes in regulations that give preference to cronies deregulation. They ignore regulatory capture, where participants in regulated industries become the rule-writers, skewing markets in their own favor, using political force to hamper competition. They highlight the evils of monopolies in markets, never recognizing that there has never been a true monopoly that wasn’t directly created by, sanctioned and protected by, or subsidized by the government. They give formal government monopolies the green light, even though there is much more likelihood of inefficiency and abuse when coercion is the official method to eliminate competition.
A free market is simply people voluntarily agreeing to trade for mutual benefit. When you have millions of people interacting, patterns of results emerge. The system is orderly, but that order is not planned, it is not operated, it is not managed. The system constantly adapts to changes in the environment under which it exists, and the patterns may change in unexpected ways, sometimes abruptly.
Those patterns might not please everyone. There is no guarantee that every individual will be better off, but the overriding reality is that humankind has never experienced another system that has raised the standard of living for as many people as free markets, enabled by strong respect for and protection of individual property rights and the limitation of arbitrary rule-making and confiscation by politicians.
Rules certainly are necessary, and complex adaptive systems, such as economies, operate under a rather simple set of rules. The power and morality of a free market system is its alignment with the very rules we take for granted in a free society: don’t take things that aren’t yours, don’t injure or kill other people except for defense from aggression, honor your contracts and commitments, be honest in your dealings, and so on. In other words, respecting the rights of other people embodies the rules of the road for markets based on voluntary commerce.
People who violate the rights of others should be held accountable. The appropriate punishment for fraud, however, is not to violate the rights of those who did not commit fraud. We are now living in a regulatory state, where many thousands of pages of regulations on the local, state, and national levels impose confusing, often contradictory rules that do more damage than good. The politically motivated rules are themselves violations of individual rights that often protect the cronies from competition. It cannot be surprising that the system reacts to the political impositions in ways that are often undesirable and unexpected. What is surprising is that so many people can blame the problem on the solution and fail to see beyond the rhetoric of politicians and their promoters.
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