Markets, Morals and Politics
Richard Epstein argues convincingly in his recent posting that free markets tend to create win/win situations for persons engaging in individual transactions, and promote the common good overall. More interesting, however, is his discussion of what he terms the “side constraints” necessary to permit the market to function properly.
Contracts to enslave or maim other people are out, and while low-wage jobs are fine, employees must be free to quit. The “capitalist legal system” must provide a remedy for force, fraud and breach of contract.
The capitalist legal system, however, is just that—a system of law. Mr. Epstein’s article presupposes that courts are available to rescind contracts based on force or fraud, and to enjoin people from enslaving others. This is a necessary presupposition. Homer’s Odyssey, for example, portrays a world with almost no political structure. The epic describes both piracy and kidnapping for the slave trade, and one has the distinct impression that such incidents were not rare in that world. Free markets therefore depend upon the rule of law; put another way, the free market is a political decision.
It is a good political decision on the whole. Mr. Epstein makes a convincing case that policies restricting the free market in order to help people actually tend to harm the people they were intended to help.
Many will argue that free markets create inequality. This is both true and false. Free markets actually contribute to equality in the most important sense because they raise the standard of living for everyone, lifting the poorest out of misery. There is in a strict numerical sense less equality, because the wealth generated by free enterprise enables people like Bill Gates to reap exponentially more profits than the ordinary wage earner. This outcome is relatively insignificant, however, because the ordinary wage earner is better off than he would be in an economy in which he was excluded from the labor market by structural unemployment. He is therefore able to support himself and his family, and has a stake in upholding the legal system because of the prospect of future earnings. In that meaningful sense, the free market makes him more equal to Bill Gates than he would be if he were dependent on government largesse.
Of course, once we have admitted that the free market is a political decision, we must be willing at least to acknowledge the possibility that good public policy might sometimes require us to place other goods above prosperity. This is not true nearly as often as many well-intentioned people think it is, but such situations do exist. As I argued in the comments to Mr. Epstein’s piece, weapons of mass destruction is one example. Despite the fact that some American firm might profit from selling such technology to anyone and everyone, we do not want Kim Il Jong to be on the other side of that “win/win” arrangement. Another commentator raised the issue of trucking and bartering in fetal stem cells from aborted unborn children. This is barbaric, and it is even conceivable that women could be paid to have abortions for this purpose. Of course, Mr. Epstein’s framework could be used to address that particular example, because that transaction would involve a contract to kill someone. Voiding such a contract, however, would require the legal recognition of an unborn child as a human being.
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Sep '10
Re: Markets, Morals and Politics
MR Epstein is thought provoking. Two comments on your post, I noticed that you, as most free market proponents do, found it necessary to explain or semi-apologize for the inequality of outcomes produced by free markets. Your remarks are not essentially different than most. I think doing so is counterproductive. I almost always wonder why one feels it is necessary to make them. Inequality is one of the more valuable results of free markets and should be embraced. Markets convey information, the freer the market the more accurate the information. Our market, while certainly not as free as one would desire, tells me that good baseball players are more valued than good college professors. Amusement more valued than thought provoking activity. From this I deduce certain things about our present society and the future of it. I understand the social pressure produced by the left that makes one feel they need to explain, but I think people who believe in free markets should start to say that one of the reasons they do so is because they produce inequality. It is past time for the mantra of fairness to be treated for the fraud it is.
Sep '10
Re: Markets, Morals and Politics
My other comment regards placing other goods above prosperity. I don’t think I disagree. The arguments in favor of slavery were primarily economic. Moral objections were either rationalized or ignored. Yet 250 years later it would be difficult to come up with a worse economic decision that the US could have made when they tolerated/encouraged slavery. Clearly in that case, as I believe it is in all others, good morals equaled long term prosperity. Your WMD producer runs the risk of having Jung blow him, his factory and family up and a good risk analysis would indicate his “profitable decision” to be folly. I am unsettle on how to state the case correctly but at least for now I think the answer lies somewhere between Rand and Smith.
Nov '10
Re: Markets, Morals and Politics
As in all cases, equality is relative. In a society in which the markets are absolutely controlled, wealth and privilege are doled out via other means, such as belonging to the Communist Party.
Take a look at the other extreme. Dress codes and school uniforms, while on the surface seemingly creating a controlled, equal environment, still leave enough room for personal expression. While they may be subtle and non-descript, these cracks in the uniformity still facilitate segregation and social stratification. While this should not be taken as an argument against school uniforms, even such a seemingly solid tool at relieving anxiety as they does not alleviate one from anxiety.
Oct '10
Re: Markets, Morals and Politics
There is a school of thought that argues that property rights do not necessarily have to be a political decision, but rather an economic one. As resources become more valuable, the cost of not establishing some basic rules regarding property rights becomes too great, and at that point individuals can and will create cooperative arrangements on their own.
For more on that, I recommend the Not So Wild, Wild West by Terry Anderson and Peter Hill.
Nov '10
Re: Markets, Morals and Politics
"the free market is a political decision."
Indeed. It's been my reiterated point to rock-ribbed libertarians at Ricochet. They're perfectly intelligent on economics, and tend to be devoid of intelligence on the matter -- conceptually and practically -- of what's involved in creating citizens. Libertarians are made, not given. Infatuation with individuality (i.e., the negation of the political) tends to prevent them from seeing this.
Epstein is far more intelligent -- e.g., he's aware that Hayek's "spontaneous order" is problematic. This was precisely the subject of Epstein's fascinating discussion with George Soros. Epstein the libertarian wants the whole world to be libertarian, but he sees that human nature does not fit that.
The immediate way he knows it’s not true is that there’s imperfect information. So one is not going to get the perfectly efficient markets . He recognizes the shortcomings of the utilitarian presumptions and of all the microeconomic libertarian theory. He knows it’s not comprehensive -- i.e., he somehow sees that "the free market is a political decision" -- and I think this shows up in the way he talks about Roman natural law.
Edited on Aug 29, 2011 at 6:09amJun '10
Re: Markets, Morals and Politics
Commerce is a beautiful thing. The jewelry-maker lays a necklace on the counter. The customer lays $500 on the counter. The customer prefers the necklace to the $500, and the jewelry-maker prefers the $500 (because he can make another necklace like it for $300, and besides, he's got a whole drawer full of them.) Everybody's happy, and nobody would go back and change a thing.
May '10
Re: Markets, Morals and Politics
Here is a concrete example. My husband's family owned a store in The Netherlands. While he was growing up, it was always closed on Sundays. The competition's stores were closed on Sundays, area farmers kept their big machinery in sheds, no one mowed their lawns... Sunday was a day for church, for visiting family and friends, for peace and quiet.
That's all gone now. Sundays are virtually indistinguishable from other days of the week.
It's a huge cultural loss.
Jun '10
Re: Markets, Morals and Politics
Markets, Morals, and Politics. Not the first time the topic was treated on this site. Markets are neither moral nor political and it is idiotic to think they are. People are moral and political, markets are not.
Jun '10
Re: Markets, Morals and Politics
Well said. Inequality is a desired result. But even it weren't, the goose lays more golden eggs with it.
Jun '10
Re: Markets, Morals and Politics
katievs: Here is a concrete example. My husband's family owned a store in The Netherlands. While he was growing up, it was always closed on Sundays. The competition's stores were closed on Sundays, area farmers kept their big machinery in sheds, no one mowed their lawns... Sunday was a day for church, for visiting family and friends, for peace and quiet.
That's all gone now. Sundays are virtually indistinguishable from other days of the week.
It's a huge cultural loss. · Aug 29 at 6:36am
Katie, please -- what is preventing these people from doing so again? Is this even desirable if it takes a law to enforce it? Did they lose their freedom in Holland? Obviously, it was not a shared value. I hear this from Canadians, too. Silly thing to worry about for a free people. The government should not be used to impose one group's values on people who if left to their own devices would make Sunday "indistinguishable from other days of the week". Governments have plenty of important things to do -- and they aren't even doing those things very well -- they should not pit people against each other.
Jan '11
Re: Markets, Morals and Politics
Good thing nobody has suggested they are. What instead has been suggested is that moral values and political choices influence markets, and people have been considering what the effects of those influences are. Specifically Ms. Rahe is pointing out that for a market to be free, there needs to be the political will to allow the market to stay free.
No society has shown the political will to adopt an absolutely free approach to markets in the last few millennia, instead opting for legal regimes that set the terms of what should be promoted or discouraged by societies in their markets. This is because without some authority enforcing certain principles, the market doesn't actually stay free for very long and an unmaintained market often produces tyranny, oppression, and other evils. That means that keeping a laissez faire system actually free, and preventing it from deteriorating, necessarily involves making judgements about what constitutes free choice and equality of opportunity. Those are political questions, they also step into issues of morality.
To put it another way, politics and societal values are factors in the marketplace, trying to keep them out of the marketplace or not accounting for their role is apt to backfire just as much as imposing certain political outcomes or moral values too strictly.
Edited on Aug 29, 2011 at 2:27pmMay '10
Re: Markets, Morals and Politics
Larry Koler
Katie, please -- what is preventing these people from doing so again?
Market pressures. I'm in favor or free markets, but not absolutely free markets. If markets aren't restrained, they take over everything.
Yes, in a way. The freedom to enjoy a quiet Sunday is essentially gone. Many of the friends and family members who used to have Sunday free, now have to work. The peaceful walks through the countryside they used to enjoy are now interrupted with the noise of heavy farming equipment.
Consider another example I've used before. Long-standing residents on a lake prize its increasingly rare peace and quiet. Some new residents want to use their motor boats and jetskis on the lake. It's their right, they argue. The right of the other owners to enjoy peace and quiet is dismissed as nothing.
This is (forgive my blunt language--I mean it kindlier than it sounds) naive and unreal. Communal leisure is a shared value--but one that requires more than individual action. It calls for a governing authority, not unlike traffic laws.
May '10
Re: Markets, Morals and Politics
That is not to say that I argue for federal intervention. I'm all about the principle of subsidiarity. Laws should be kept to the minimum consistent with a humane and well-ordered society.
And power should devolve to the smallest possible unit: individual, then family, then town, then state, and only then federal government, with the larger bodies confined to the areas that are beyond the competence of the smaller (such as common defense, and interstate commerce.)
May '10
Re: Markets, Morals and Politics
Further thoughts: A store owner who chooses to start being open on Sundays is typically not consciously aiming for a 24/7 economy. What he wants is an edge. He wants to get ahead of the competition. So, he sets aside the question of communal goods in favor of his private interest.
If his competition wants to stay in the game, he'll have to open on Sundays too. If his workers want to keep their jobs, they'll have to work on Sundays now...
Now, that kind of pursuit of private interest is the nature of capitalism. It's perfectly legitimate and generally serves the common good, provided its kept within bounds.
Jun '10
Re: Markets, Morals and Politics
BThompson
Good thing nobody has suggested they are. - Aug 29 at 8:53am
Edited on Aug 29 at 09:16 am
The whole of the last paragraph of Rahe's piece is political/moral screed that has nothing to do with markets per se. The reason precursor institutions are required is to enforce morality on the market place.
Jan '11
Re: Markets, Morals and Politics
duplicate
Edited on Aug 29, 2011 at 10:20amJan '11
Re: Markets, Morals and Politics
duplicate
Edited on Aug 29, 2011 at 10:20amJan '11
Re: Markets, Morals and Politics
In that paragraph Ms. Rahe is drawing logical conclusions regarding Mr. Epstein's point about something he raised cursorily under the rubric "side constraints". Mr. Epstein, who certainly isn't interested in over-incorporating moral considerations into the market, readily concedes that certain political considerations and institutions are required for a free market to operate. Ms. Rahe explores the logical extensions of Epsteins concession and nowhere does she resort to a "screed" nor is she wagging her finger at anyone. If you'd like to refute her argument, take it up. Claiming that she is arguing that markets are moral or political agents doesn't demonstrate you've shown much attention to what she's actually written, though.
May '11
Re: Markets, Morals and Politics
I absolutely agree that no one is entitled to equal compensation or to have the government step in and set a value on their goods or services other than the value the market puts on them. Equality, I guess, is a loaded word. There is a certain equality among human beings that at least arises out of our freedom, and it is not in keeping with human dignity for people to live in squalor and misery. The free market is really the best public policy for alleviating squalor and misery, though.
Jun '10
Re: Markets, Morals and Politics
BThompson
In that paragraph Ms. Rahe is drawing logical conclusions regarding Mr. Epstein's point about something he raised cursorily under the rubric "side constraints". Mr. Epstein, who certainly isn't interested in over-incorporating moral considerations into the market, readily concedes that certain political considerations and institutions are required for a free market to operate. Ms. Rahe explores the logical extensions of Epsteins concession and nowhere does she resort to a "screed" nor is she wagging her finger at anyone. If you'd like to refute her argument, take it up. Claiming that she is arguing that markets are moral or political agents doesn't demonstrate you've shown much attention to what she's actually written, though. · Aug 29 at 10:18am
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