Notes on "Free Markets"

I

The “Free Market” isn’t really real. It never was. Even venerable classically liberal economists like David Ricardo and Adam Smith understood this proposition. Markets exist as arenas of exchange that facilitate the trade of goods and services between financiers, producers and consumers. Each one of these agents is a real live human being, or a legal fiction like the corporation, embedded into a number of different social institutions which, if we pay any attention to simple social organization, are compelled to act with a minimum level of cooperation and follow a rudimentary set of norms and rules that both condition behavior and require specific levels of good faith performance. The Laws of court are perhaps the best institutional example.

The state guarantees the enforcement of contracts and the protection of property rights. The fancifully abstracted notion that governments get in the way of contract or property disputes is to a certain extent misguided, often overlooking the alternative scenario of low-level social disruption or outright public disorder. Markets require the trust of civic legal institutions, tacitly abide by their rules, and prosper to the extent that they are seen as socially legitimate. Which, with respect to certain activities on the margins, for example the sale of marijuana, is always an ongoing and perennially contested soci-political debate. If you live in the real world, social institutions that regulate market activities are an inescapable reality.

It is also widely recognized that while markets operate within the context of these social institutions they are also continually shaping their development. When we look at the growth of the post-war automobile industry we see that urban and suburban planning mirrored the growing need for automobile use, and that the proliferation of single-family homes created a new market for a variety of different household consumer goods, from refrigerators to televisions to bed frames to coffee makers to lamps. The “Free Market” was responding to trends in social development insofar it was also determining them, and with the advent of the age of advertising the market began to shrewdly cater to an effervescence of a particularly new form of mass, modern culture.

But inside the complicated machine of modern society, specialized commercial industries, particularly in aerospace, medical and pharmaceutical sciences and agriculture, among others, worked within the ambit of government regulatory agencies, agencies that set the guidelines of market interaction and exchange. Quite naturally, though, these industries have begun to capture these regulatory agencies given their own propriety and specialized expertise. Oversight became a form of volunteerism where professional and regulatory bodies crafted, most often self-interestedly, the rules of the game.

Many of today’s market inefficiencies exist because markets aren’t free. Large regulatory agencies like the Canadian Medical Association in Canada are in positions of informational asymmetry, to which civil bureaucracies over-rely on their expertise and positional status, and come to accept their recommendations as sacrosanct. An alternative form of health service like naturopathy has been slowly but steadily expanding into the health care market as it has continued to gained social respectability. This, no doubt, has taken a considerable amount of social and political advocacy, along with a substantial amount of capital. “Free Markets” have all types of access costs, and we’d be fooling ourselves if we thought otherwise.






II

Fredrich Hayek’s insight that collectively planned economies lack the informational capacities to anticipate the prices and consumer trends in an incredibly unwieldy patchwork of decentralized markets is likely the strongest argument against most forms of command socialism. Distributing and allocating resources is something market capitalism has shown tremendous prowess in undertaking. But we’re not shadowboxing with the ghost of Lenin. If you live in a western industrialized country, you live with a system of rules that act as a bulwark toward your personal wellbeing.

Hayek understood the necessity of the rule of law, and sets of social and civic institutions that established the normative precepts for social behavior and trust. At a very crude level the state is a collection of the civil institutions, families, religious, scientific, cultural associations, markets, and municipal bodies that normalize and sanction contemporary conduct. These are all manifestation of “A Culture” and express themselves in all our social and linguistic interactions and exchanges. Markets do not exist in a vacuum outside of them.

III

If we accept that the market is a carefully staged competition that operates under the rules that its participants, to varying degrees, attempt to follow, then it’s easy to see why some misunderstand its essential nature. For some on the Left, competition is the inherent problem. Even while some aspire to equalize opportunity, the objective goal is to equalize outcomes. This would be incredibly self-defeating, given the diversity of not only human capacities but also the diversity in human aspirations. There isn’t only one market, there are many; and there isn’t only one status game, there are an innumerable amount of them.

For some on the Right, however, there is an almost ahistorical myopia of the reality of first-order injustices, those that have persisted over generations. The “Free Market” favors the most socially and physically capable, the thinking goes. Because racism and sexism don’t exist today, their long shadows aren’t being cast onto contemporary debates about race and gender. Equality of opportunity, it follows, equals not only equality of access -- and some might even suggest over-access – it should mean equality of outcomes. And since empirically this isn’t always the case, a far more pernicious claim against genetic inability is tacitly entertained. It’s as though the average male height of 5’6 in 1900 had increased to 5’10 in 2003 in a social, historical vacuum.

IV

Ultimately, the competitions that the market stages are neither free nor entirely efficient. They pit together the monopolies, statutorily regulated agencies, the public and private interest groups, me and you. They represent the largest competition of all: that contest to democratically seize the state through argument, debate, enticement, persuasion, and now more unsavorily, astounding sums of capital. They represents, quiet simply, the essence of politics.