Freedom School (blog edition) No. 1 – "Are free markets to blame?"

December 2, 2009 by  

20090325nevereconomyYaron Brook, Executive Director of the Ayn Rand Institute in Irvine, California, together with his colleague, Alex Epstein, recently appeared on a local television program “to discuss the roots of the financial meltdown, and why free markets are not to blame.” Before I had watched the video, my initial response to the discussion topic was:

“why free markets are not to blame”…isn’t that the same reason that fairies are not to blame? A is A.

My initial response was misguided, as was Epstein’s. Like me, he argued that the free market was not to blame because the U.S. market is not a free market.

The host then inquired of Brook “What do we need to do to turn [the economy] around?” I was surprised by Brook’s response.

Brook answered that, with respect to the short term:

“We need to establish some sort of stability right now. Stabilizing the housing market, stabilizing the banking industry, stabilize – ultimately – the stock market. And that is a difficult task, there’s no doubt about it. I’d like to do that in a way that increases freedom; in a way that gets government out of our lives more.”

Brook went on to explain that, to stabilize the housing market, the government could allow more immigration: immigrants would bring in money and buy houses, thereby stabilizing the housing market. To stabilize the banking industry, he proposed eliminating capital gains taxes and dropping the heavy regulation of banks (ownership regulations, etc.), which, he said, would bring more capital into the banking system and thereby stabilize it.

I think Yaron Brook is an excellent Executive Director, and that his advocacy work is a value to people living in and around the world. However, in my view, his argument on this show could have been much better. Indeed, the one he offered might actually work to undermine his intended purpose.

First, it is a mistake to argue about whether a regulated vs. a free market caused an economic downturn/”meltdown”. Economists – even those who, like Milton Friedman, believe they are advocating individual freedom – love to talk about “markets”. They love measuring the success of an economy; they deal with the aggregated and collective data that describes or measures “the economy”. They focus on how using or not using force might or will change economic figures. In contrast, those who are actually advocating individual freedom, are not speaking about economics and figures. They are talking about individuals.

“Markets” talk is a mistake for an advocate of individual freedom. Markets are neither regulated nor free: markets are merely places in which individuals attempt to trade. The so-called “free market” is not a place where the market (i.e., the place) is free: it is a place where individuals are free.

Blaming a “free market” or the “over-regulated market” on the economic meltdown is like blaming an unlocked door for the fact that a burglar entered your house. Yell “stupid door” at the door, after the burglary, and people will realize you’re being irrational; they’ll know that you should be blaming yourself for leaving the door unlocked. Yet collectivists do the same thing when they blame the “market” (a place) for the economic downturn. They are doing the equivalent of yelling “Stupid door!”: in terms of explicit language, they are blaming a place, not individuals. And – almost without exception – “free market” advocates fail to dismiss the collectivists’ argument by simply pointing out that places don’t cause economic downturns, individuals do.

At this point, you might think I’m being silly. “Oh, come on McKeever, we all know that a free market is a place where people are free to trade, you’re making distinctions without differences”. Not so.

Consider who benefits by replacing talk of “free individuals” with talk of “free markets”. Consider what collectivists do not have to say so long as nobody is talking about individuals. For the purposes of winning over the people listening to the debate, consider how advantageous it is to the collectivist not to have to come out and say what he means.

The collectivist is not opposing “free markets”, per se. He is not trying to control “markets”, per se. He is trying to enslave and expropriate individuals. Period. When the collectivist asks “is the free market to blame for the economic downturn?” he means “is the failure to enslave and expropriate individuals to blame for the economic downturn”. For the love of life: call him on it! Make the true nature of his question explicit. If the collectivist truly wants to have that debate – the one about whether the economic downturn is due to a failure to enslave and expropriate people more than the government already does – good. Let him take and defend – explicitly – the side advocating, per se, the enslavement and expropriation of the listener/watcher. For the freedom advocate to allow the collectivist to depersonalize the discussion – to discuss “regulation of the market” instead of “enslavement and expropriation of individuals” – is a huge and self-defeating concession to the collectivist. The freedom advocate must keep the focus on individuals, not on markets.

Second, I disagree with the idea of advocating the “stabilization” of the economy. There is a debating tactic – called “cross-dressing” – in which one assumes the lingo of ones opponent, and makes ones argument in terms of that lingo. A freedom advocate asked “what can be done to turn the economy around” might well believe that people desire economic “stability” of some sort, and he might therefore speak of deregulation as a means of achieving “stability” (as Brook did). However, that is an error. By holding up stability as a priority, Brook implicitly held up stability as (a) the essential goal, and (b) an intrinsically valuable goal. By holding up stability as the intended consequence of de-regulation, Brook allowed his listener to infer, logically, that his intended purpose in advocating deregulation is to achieve an economic outcome of one sort or another. Doing so actually bolsters the case for tyranny and collectivism, and sets up capitalism for a fall.

What does “stability” mean? That prices do not change much? If so, and if stability is what is essential and “needed”, then we are bolstering the case for wage and price controls: for slavery and expropriation.

A given deregulation is good if it achieves economic stability? Well, what if some sort of deregulation achieves economic instability, but improves individual freedom? For example, the law profession is comprised of self-governing guilds. It is extremely “stable”, and – with competition limited by guild-admission limits – legal fees never seem to suffer a melt-down. Ending the guilds – deregulating – would probably result in an influx of legal practitioners and cause a “melt-down” in the price of legal services. Does that mean that we should keep laws and regulations that prohibit the practice of law by those who are not guild members?

What if things are deregulated, but stability does not result? Does that mean deregulation is a failed idea? Even if the deregulation did result in less slavery and expropriation?

A free individual can trade or not trade without facing as much as a threat that the government will take his life, liberty or property without his consent. So far, most regulations in the USA and Canada do not force a person to trade. Instead, they normally penalize certain instances of production (e.g., hemp farming) or trade (e.g., fixing a car engine without a license to do so). To trade a value, one must create a value. When individuals create and trade values, the “economy” is said to grow. So, when debating a collectivist, do not ask the collectivist to explain how “free markets caused the economic melt-down”. Rather – if you must talk of the economy, rather than of the essential issue, which is reason – ask the collectivist to explain how restricting individuals’ freedom to produce values or to trade them grows an economy.

As I have said before, it was Bill Clinton whose desk bore the sign which read “It’s the economy, stupid”. In reality, for the advocate of individual freedom, “It’s never the economy”.

I close simply by wishing Yaron and Alex the very best in all of their continuing, admirable, advocacy efforts.


3 Responses to “Freedom School (blog edition) No. 1 – "Are free markets to blame?"”

  1. $ on December 3rd, 2009 11:36 am

    I was uncomfortable with what Yaron had said, but not sure why. Excellent thinking on your part! and good advise.

  2. Glenn on December 3rd, 2009 2:17 pm

    I thought Epstein did an excellent job in getting the point across that what caused the economic meltdown WAS government intervention and NOT the “free market”, albeit he didn’t get into the reasons of WHY we need to remove government intervention in the economy. But that wasn’t the point of his remarks. He was just stating that government intervention in the market place is what caused the meltdown. This is absolutely true. His remarks didn’t require him to get into a definition of free markets or free individuals to get this point across.

    However, I do agree that during this interview Yaron Brook could have focused more on the essentials rather than get into an economic argument. In fact, his argument on “stabilizing in a way that increases freedom and gets government out of our lives”, is kind of reversing the hierarchy of political principles. Because obviously, getting the government out of our lives WILL increase freedom and do all the stabilizing we need. He missed the essential in this argument and I think that being the Executive Director of the ARI he should be focusing more on the essentials of Objectivism rather than geting bogged down in economic arguments.

    In regards to your points about “market” talks. Perhaps an answer to the question, “Did the free market cause the economic meltdown?” would be:

    “That question is non-sensical. Consider that a free market is a word used to describe individuals trading value for value through mutual consent, i.e. absent any coercion. The “economy” is a word used to describe where these transactions take place, e.g. local economy, Canadian economy, world economy.

    Like a “market”, an economy can either be free or it can be hampered by outside forces. Individuals can either trade freely with other individuals or their transactions can be interrupted or affected by other parties. When this hampering occurs what would result are negative consequences on the natural outcomes of these transactions. An economy, like a plant growing freely from the ground, will naturally continue to grow (provided there is adequate water and sunlight) unless an outside source prevents it from doing so.

    To suggest that individuals trading freely with one another (i.e. a free market) would cause an economic “meltdown” would be a contradiction in terms because a “meltdown” necessarily implies the very opposite of economic freedom, i.e. a hampering of that market. ”

    All in all, good thinking in showing that individualist advocates shouldn’t get trapped in collectivist lingo and arguments.


  3. Elton on December 19th, 2009 1:44 am

    Great Post. I never thought of looking at the “Market” in that way. The main issue is always freedom of the individual.

Feel free to leave a comment...
and oh, if you want a pic to show with your comment, go get a gravatar!