Tuesday, May 15, 2012

What is the Free Market?

Today I’d like to write what I think the free market really is versus what we have been told it is by pundits, politicians, professors, and protestors.  I have often been alarmed by the number of people who really don’t seem to know what the free market really is but I have come to not find ignorance all the surprising.  We are often told that capitalism is the free market and such terms are interchangeable, but in reality they are not, especially if people understood the origin of the terms.  It is high time that I at least go over this and hopefully enlighten some people (like 1 or 2 of the 3 people who read this blog):

  • The free market is not the same thing as capitalism.  Capitalism is a concept that was defined by Karl Marx in order to identify the system of corporatism that Europe was under at the time.  In essence, it was a system where private businessmen would collude with the politician in order to expand a particular industry.  Ironically, in the United States is was the businessmen who did not enlist the aid of government in any capacity who out did the capitalists.  It was not until the government created enough regulations that capitalism became the more accepted model in business.
  • The free market is a system of voluntary transactions between individuals.  Put simply, it is where you interact (or don’t interact) with other people on a purely voluntary basis.  When the government intervenes, it is never voluntary because by definition a government body is an institute whose primary purpose is to exert force.   By exerting force, the government nullifies the voluntary nature of the free market.
  • In contrast to my previous definition, the free market is not really a system.  It is more like a mode of behavior where people are free to choose the goods and services they want.  Using the word “system” implies that there is some way to regulate and control it when by definition you do not control or regulate a free market.
  • The free market follows the non-Aggression principle.  Should someone defraud another person in the context of a free market interaction, the first person has committed theft and violated the non-Aggression principle.  The arbitration of the offense, however, need not require a monopolistic court system.  Do not, though, think that the non-Aggression principle requires the free market or vice-versa.  Rather, the free market is the consequence of a society that wholly embraces the non-Aggression principle when dealing with others.
  • The free market can exist under any form of government that does not require a centrally-run economy.  For example, you could have a free market under a monarchy where the King is merely the guy who owns his own property and provides for the general defense and justice of all who live under him.  It does not exist under a Socialist, communist, or Corporatist form of government as by their very nature their cannot be a free market.
  • There will probably never be a true free market as that would require an anarchist society.  While such a society could theoretically be possible, in practical terms we forget of the human need to have a leader.  By far the vast majority of people are followers who are incapable of making important decisions on their own.  Well, they are capable, they just have no desire to do so.  Collectively, most women behave like followers, despite a century of progressive, feminist reforms.  In most cases, women vote for more state power, not less, and are more than happy to defer to a stronger Alpha male while despising the lesser Beta males.  Of course, this is more along the lines of Game Theory.  The point is that human beings always want someone to lead them so they can be free from the responsibilities that could possibly yield undesirable consequences.  A true free market assumes that each and every individual wants to completely run his or her own life as he or she sees fit.  That never happens in the real world, even with the biggest Alpha male in the world.
  • The free market is not fair.  All voluntary interactions that take place are never about finding some equality of result.  Whenever two individuals make an exchange of some kind, both believe they are getting a better deal.  When you buy a product from a store, for example, you do so because you want it and you are willing to part with the money the store is asking while the store is willing to part with the product in exchange for your money.  Neither side in such an interaction have made a fair trade.
  • The free market is the ultimate form of direct democracy.  There is no election, no politician who appeals to the lowest common denominator in society, and no majority oppressing the minority.  There is only supply and demand the behavioral laws that govern them.  If a society rejects a brand of soap, for example, it happens immediately and the company goes out of business.
  • The free market is no substitute for morality nor does it enforce it.  Morality comes from God (or nature if you’re afraid of Flying Spaghetti Monsters) and the free market does nothing to enforce it.  Instead, voluntary transactions enforce what is commonly considered good behavior.  For example, if a snake oil salesman is caught in his con, people can simply chose not do business with him.  While it does not encourage or enforce morality, it does allow those with integrity and a good reputation to rise to the top.
  • Wall Street is not a free market entity.  If insider trading is considered illegal, then it is not free market.  While I have my disagreements with the solutions of left-wing radicals, I do agree with them in their assessment of Wall Street.
  • The Federal Reserve is not a free market entity.  It was created by elite banksters in order to benefit their banks.  When the Federal Reserve creates money, it sends it first to the banks so that they can loan it as they see fit.  Then entire system is designed to be backed by the force of the Federal government and thus, it is not free market.  These days, it is considered illegal to offer alternatives to the US dollar, with the Federal government calling you a financial terrorist.

In short, the free market is nowhere to be seen in the United States in this day and age and, in fact, in the past century as well.  I doubt there has ever been a society where a true free market has existed, but there have been plenty that have come close.  The key theme here is that people interact with others on a voluntary basis and are free from external coercive force.  And while the free market certainly has its flaws, I’ll take a flawed system of voluntary interactions over a flawed system of force interactions, largely because there is no such thing as a perfect system of anything.  It always has people in it and people are largely flawed, selfish idiots.  If it was voluntary, it minimizes the number of selfish idiots you have to deal with.