Mojo is winding down his interest in his blog. I am going to re-post a few of my posts their over here, for posterity. I may want to revisit the subjects.
In an attempt to get more of you to read
Jeffery Tucker's excellent books, Bourbon for Breakfast and Its A Jetson's World, I'm going to copy a chapter from the former here.
Read chapters 24-28 of
Bourbon for Breakfast
(starts at page 114) for the reasons for why he'd be fine with my
copying his work here. (Summary: no one owns ideas, please take my
ideas as yours)
Chapter 18 (
page 88)
How Free Is the "Free Market"?
See if you can spot anything wrong with the following claim, a version
of which seems to appear in a book, magazine, or newspaper every
few weeks for as long as I’ve been reading public commentary on economic
matters:
The dominant idea guiding economic policy in the United
States and much of the globe has been that the market is
unfailingly wise….
But lately, a striking unease with market forces has entered
the conversation. The world confronts problems of staggering
complexity and consequence, from a shortage
of credit following the mortgage meltdown, to the threat
of global warming. Regulation … is suddenly being
demanded from unexpected places.
Now, a paragraph like this one printed in the New York Times opinion
section on December 30, 2007—in an article called “The Free Market: A
False Idol After All?”—makes anyone versed in economic history crazy
with frustration. Just about every word is misleading in several ways, and
yet some version of this scenario appears as the basis of vast amounts of
punditry.
The argument goes like this:
Until now we’ve lived in a world of laissez-faire capitalism, with government
and policy intellectuals convinced that the market should rule no matter
what. Recent events, however, have underscored the limitations of this
dog-eat-dog system, and reveal that simplistic ideology is no match for a
complex world. Therefore, government, responding to public demand that
something be done, has cautiously decided to reign in greed and force us all
to grow up and see the need for a mixed economy.
All three claims are wrong. We live in the 100th year of a heavily regulated
economy; and even 50 years before that, the government was strongly
involved in regulating trade.
The planning apparatus established for World War I set wages and
prices, monopolized monetary policy in the Federal Reserve, presumed
first ownership over all earnings through the income tax, presumed to know
how vertically and horizontally integrated businesses ought to be, and prohibited
the creation of intergenerational dynasties through the death tax.
That planning apparatus did not disappear but lay dormant temporarily,
awaiting FDR, who turned that machinery to all-around planning during
the 1930s, the upshot of which was to delay recovery from the 1929
crash until after the war.
Just how draconian the intervention is ebbs and flows from decade to
decade, but the reality of the long-term trend is undeniable: more taxes,
more regulation, more bureaucracies, more regimentation, more public
ownership, and ever less autonomy for private decision-making. The federal
budget is nearly $3 trillion per year, which is three times what it was in
Reagan’s second term. Just since Bush has been in office, federal intervention
in every area of our lives has exploded, from the nationalization of airline
security to the heavy regulation of the medical sector to the centralized
control of education.
With “free markets” like this, who needs socialism?
So, the first assumption, that we live in a free-market world, is simply
not true. In fact, it is sheer fantasy. How is it that journalists can continually
get away with asserting that the fantasy is true? How can informed writers
continue to fob off on us the idea that we live in a laissez-faire world that can
only be improved by just a bit of public tinkering?
The reason is that most of our daily experience in life is not with the
Department of Labor or Interior or Education or Justice. It is with Home
Depot, McDonald’s, Kroger, and Pizza Hut. Our lives are spent dealing
with the commercial sector mostly, because it is visible and accessible,
whereas the depredations of the state are mostly abstract, and its destructive
effects mostly unseen. We don’t see the inventions left on the shelf, the
products not imported due to quotas, the people not working because of
minimum wage laws, etc.
Because of this, we are tempted to believe the unbelievable, namely
that government serves the function only of a night watchman. And only by
believing in such a fantasy can we possibly believe the second assumption,
which is that the problems of our society are due the to the market economy,
not to the government that has intervened in the market economy.
Consider the housing crisis. The money machine called the Federal
Reserve cranks out the credit as a subsidy to the banking business, the bond
dealers, and the big-spending politicians who would rather borrow than
tax. It is this alchemic temple that distorts the reality that credit must be
rationed in a way that accords with economic reality.
The Federal Reserve embarked on a wild credit ride in the late 1990s
that has dumped some $4 trillion in new money via the credit markets, making
expansion of the loan sector both inevitable and unsustainable. At the
same time, the federal bureaus that manage and guarantee the bulk of mortgages
have ballooned beyond belief. The popularity of subprime mortgages
is the tip of a massive but buried debt mountain—all in the name of achieving
the “American dream” of home ownership through massive government
intervention.
Say what you want to about this system, but it is not the free market at
work. Indeed, the very existence of central banking is contrary to the capitalist
ideal, in which money would be no different from any other good:
produced and supplied by the market in accord with the moral law against
theft and fraud. For the government to authorize a counterfeiter-in-chief is a
direct attack on the sound money system of a market economy.
Let’s move to the third assumption, that government intervention can
solve social and economic problems, with global warming at the top of the
heap. Let’s say that we remain agnostic on the question of whether there is
global warming and what the cause really is (there is no settled answer to
either issue, despite what you hear). The very idea of putting the government
in charge of changing the weather of the next 100 years is another
notion from fantasy land.
The point about complexity counts against government intervention,
not for it. The major contribution of F.A. Hayek to social theory is to point
out that the social order—which extends to the whole of the world—is far
too complicated to be managed by bureaus, but rather depends on the
decentralized knowledge and decisions of billions of market actors. In other
words, he gave new credibility to the insight of the classical liberals that the
social order is self-managing and can only be distorted by attempts to centrally
plan. Planning, ironically, leads to social chaos.
You don’t have to be a social scientist to understand this. Anyone who
has experience with public-sector bureaucracies knows that they cannot do
anything as well as markets, and however imperfect free markets are, they
are vastly more efficient and humane in the long run than the public sector.
That is because free markets trust the idea of freedom generally, whereas
other systems imagine that the men in charge are as omniscient as gods.
In one respect, the New York Times is right: there is always a demand for
economic intervention. The government never minds having more power,
and is always prepared to paper over the problems it creates. An economy
not bludgeoned by powerful elites is the ideal we should seek, even if it has a
name that is wildly unpopular: capitalism.
