Posted by
WRH Bill (aka Mr. Bill) on Saturday, December 06, 2008 10:16:48 AM
I don't claim to be a real expert on economics (some would say I'm not a real expert on anything:-) but I do have a general familiarity with the free-market economic ideas espoused by people like Milton Friedman, Thomas Sowell, Ayn Rand, etc. I believe in the free market, in the idea expressed by Friedman that"a lack of belief in the free market is, at bottom, a lack of belief in freedom itself". But some would say my time is over. Not only liberals and leftists but some conservatives as well are attributing the current economic crisis to the failure of free-market ideas and suggesting that free-market economic libertarianism is, or soon will be, dead. It is particularly common to sneer at people who believe in "the magic of the free market".
Well, up to a point, they're right to sneer. The free market isn't magic. Magic, unfortunately, doesn't exist. (I enjoy a lot of fantasy fiction in which magic does exist, but I try not to confuse it with the real world.) Enthusiasts who speak of the magical free market as it it could solve all economic problems painlessly and make the world a utopia of plenty for everyone, if only the market was allowed to function completely unrestricted by government, are way overstating their case.
The free market is a way in which fallible human beings carry out their affairs in a decidedly non-magical and often harsh material world. Being part of the free market doesn't prevent people from making mistakes and being foolish, short-sighted, dishonest, and, yes, greedy (though I would define "greed" as wanting what one has not earned rather than simply wanting "more" or "too much"). Relatively free markets have helped people create tremendous wealth and spread it around widely, but the free market cannot guarantee that everyone will always have everything they need, want, or even deserve.
But the basic alternative to free-market ideas is advocacy of government controlling the economy; having politicians and bureaucrats and voters make economic decisions instead of buyers and sellers and private owners; using the power of government (which is, ultimately, the power to point a gun and say "Do what I tell you or I'll kill you") to overrule and change private economic decisions. It is assumed that getting government involved produces better results than relying on "the whims of the market". But there's one basic problem (at least) with this idea: Government isn't magic either. I said human beings acting freely in a free market are fallible, and they are. But government is made up of human beings too, and they are just as fallible, if not more so. Getting a government job never made anyone wiser or more moral than they were before. Politicians and bureaucrats and voters are just as prone to foolishness and short-sigtedness and selfishness (the bad, non-Randian kind of selfishness) and just plain error, as are owners and managers and buyers and sellers on the free market. Moreover, government still operates in that mean ole material world where you can't get something for nothing and things never will be perfect.
And as free-marketeers from Adam Smith on down have understood, while the free market is no absolute guarantee against mistakes being made and bad things happening, it does have certain "invisible hand" advantages that tend to make selfish and greedy people work for the general good and to punish screwups before they get completely out of hand. When government thinks it can do things better than the free market, what it often does is the equivalent of putting a penny in the fuse box-- and keeping things humming along nicely *until* the fire breaks out and everything blows up. I don't claim to fully understand what all caused the current economic crisis, and I don't deny that the kind of human screwups that happen even in free markets had a lot to do with it.... but I also suspect that people in government, including the very dubiously "conservative, free-market" Bush administration, put a lot of pennies in a lot of fuse boxes which now are all blowing up at once.