Monday, May 18, 2009

Why Markets Work

The toughest part about being a libertarian is the inevitable task of being asked to defend the free market. Liberals will agree with you (usually) on any number of issues regarding personal freedom, but markets are usually cast in a different light. To liberals, questions about markets are never about the freedom of people to exchange goods and services, but about the relative positions of the parties involved. Just as some radical feminists have sought to define all heterosexual sex as rape due to the relative positions of power of males and females in our society, the liberal view of the market has sought to define all individuals as victims or potential victims of corporate power.

What liberals never seem to understand are that markets- free markets- are essentially the natural order of things. It's in our nature to trades good and services, to wheel and deal, and to use these exchanges to make our lives somehow better. Now governments help to make these exchanges flow more smoothly, through laws protecting against fraud, through the enforcement of contracts, and yes, even through the maintenance of infrastructure. Commerce-trade-markets- whatever you want to call it, would still occur in the absence of government, only much, much less efficiently. But the real key is our ingrained human nature, our ingenuity that helps one group or person meet the needs of another group or person.

This was very much evident on Saturday night, when, along with some friends of ours, my wife and I headed down to a vineyard in Wallingford, Connecticut for dinner. Gouveia Vineayard doesn't serve food, but they do allow you to bring your own food into their facility, a newly remodeled rustic looking building at the top of the vineyard, with great views and loads of comfortable seating. On weekend nights they even provide live musical entertainment. And why provide all of this? Because it makes them a hell of a lot of money. They may allow you to bring food, but they do not allow you to bring your own beverages. What's available is their wine, available by the glass or bottle, along with a small selection of non-alcoholic beverages. And what it makes for is one hip place for a crowd that's a bit sophisticated for the typical bar scene. People come for the evening with their large picnic baskets, hang out, listen to the music, and probably buy as much wine as the winery would otherwise sell in a typical weekend, if not entire week. And it's easy money. No food means no food service license and so long as they only serve their own wine, it means not having to worry about a liquor license. It's a great way for the winery to sell their products without having to spend a lot of money doing it.

Markets have also been ever present in my mind as my wife and I have finally made our way through the first few seasons of the Wire. It's an incredible show which I hope to get to in more detail at some point down the road, but as I was saying, the Wire is heavily steeped in this idea of people's needs being met through human ingenuity. Now with the Wire, we are talking about the drug trade, but whether we're talking about narcotics or something without those negative connotations, the same principles still apply. People have wants, needs, and desires, and there are other people out there who will attempt to meet those needs. The Wire showcases this element of human ingenuity in the form of Stringer Bell, second in command of the Barksdale drug ring. Bell attempts to run the criminal enterprise as much like a real business as possible, recognizing that much of the violence of the drug trade only takes away from profits.

The reason libertarians have so much faith- so to speak- in markets is that markets work. It's not just that they are the most efficient means of allocating money, skills, and resources between individuals, but that they represent a sort of natural order. The liberal argument for regulation of markets usually revolves around making circumstances more fair and more safe for the parties involved. The libertarian response to most regulation is that it doesn't work. People will find their way around laws or regulations that are wholly inconvenient. And when it comes to the less intrusive sort of regulations, the fact of the matter is that it is generally more cost effective for the largest of large corporations to comply with such regulations. Ask any small business owner and they'll tell who feels the largest brunt of economic and other related regulations. Markets work because of human ingenuity to meet our own needs. Regulations, for good or bad, are designed to restrict the free choices of individuals in an otherwise functioning market.


Blogger McMc said...

I've always found the left a bit hypocritical. I don't really want to generalize too much here, but bear with me. Being a Republican and being religious seem to go hand-in-hand sometimes, whether or not it's a fair assumption or not. A lot of big names on the right make no secret of their religious beliefs being the center of their moral spectrum and really, there's no problem with that. As for the left, it's not that there isn't religion playing a part, it's just people taking religion in a different light or just ignoring it.

Here's the point I'm trying to get at. The hardcore Christians, I'd imagine, are mostly Republican. I just think that's a fair assumption to make. Either way, as I mentioned, the right is generally tied with religion, specifically Christianity and that's just the way people see it. One topic that always seems to be hanging around is Creationism versus Darwin. Anyone that supports Creationism is generally bashed for believing it and ridiculed for wanting it in school. Why? Because Darwinism is pretty much fact now, and people who disagree with Creationism are generally people who lean toward the left.

Here's where I tie it all in...

Does anyone else recognize the hypocrisy? Again, I don't want to generalize or stereotype too much, but the whole idea of Darwinism and evolution is "Survival of the fittest". If you are going to so steadfastly push for that and accept that as NATURE, then why in God's name would you be so opposed to the free market? Why is it a bad thing that some businesses are more successful than others? Why is it a bad thing for mega-stores like Walmart and Target to exist? Why is wealth a bad thing? The free market is a natural being, as you say, and in it's purest forms you get the best products.

Keep tying it into evolution. Evolution happens to correct a previous defect, does it not? A creature was having a difficult time surviving so it adapts by growing wings or growing stronger or whatever. It's the same with business. A company makes a mistake with a product so it corrects itself. Over-regulation is like trying to even out the playing field in the animal kingdom. You don't want every business on an even keel because it will restrict innovation. You don't want every creature on an even keel because there would be no reason to evolve, a.k.a. improve. Humans evolved so much that they were capable of complex thought. That complex thought has come around full circle in business in believing that it's a bad thing for some companies to be better than the other.

A lot of rambling, but I hope that all makes sense in the end. I'm not a fan of hypocrisy and this just seems so blatant and obvious.

8:59 PM  
Blogger lonely libertarian said...

It wasn't the direction I really wanted to head down, but now that you've brought it up, yes, we are sort of talking about survival of the fittest in the way. To break that down to it's bear essentials, yes it means that someone has to succeed and someone has to fail, but it's this competition that is beneficial for society as a whole. More people looking for more ways to make more money, giving more people more choices and making more people's lives all the better for it.

What markets mean, what survival of the fittest means is up to us as a culture. Here's where your point about the left's hypocrisy plays in, as their economic views tend to be based on defying the "natural order" of things. The left assumes that we've got to do something about the process, that there's something wrong with the idea of competition in the first place, but as I was saying before, survival of the fittest can be on our own terms. The left gets worked up thinking survival of the fittest means we'd have the poor dying in the street, but there's nothing to say we can't help the poorest in society. Winners and losers should be about those involved in the game in the first place, not those struggling to make ends meet.

10:26 AM  
Anonymous rose said...

Liberals argue that evolution is real and that anyone who believes in creationism is a blind utopian who can't handle reality.

Then they turn around and in their quest for their own little utopia here on earth, they advocate policies that have failed countless times, in countless decades, in countless countries (multiple times in the same countries even) and they BLINDLY oppose a system of economic arrangements that has worked (not perfectly, but better than everything else) in countless countries, in countless decades and centuries.

I am NOT a creationist. But given two questions:

1) How was the universe created/how did life start?

2) What system of economic arrangements leads to the best outcomes?

We know the answer to #2. There's quite a bit more uncertainty to #1. So I think mocking creationism and opposing free-markets is a really interesting position for people who view themselves as the rational ones.

10:43 AM  

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