Myth of the Unregulated Market

Are free markets unregulated? Are there no controls on the extended order?

Essentially, economics is the study of how resources are applied and how the factors of production are managed in the struggle to create the wealth that sustains human populations.

Intellectual elites, proud of their intelligence and rationality, are unable to imagine that a self-ordering system could efficiently allocation of resources and manage production. When these elites see a functioning system they typically have two reactions:

1) It really isn’t self-ordering (because those things aren’t possible) so there must be hidden, and sinister, forces making the necessary decisions: the supposedly-free market is not free but regulated by Capitalists or the Wealthy or Jews, or some evil combination thereof. (See postings on Manichaeism)

2) A progressive intellectual elite (themselves), floating above the grubby struggle for personal gain that infests most of humanity, can, by making the decisions, improve efficiencies in production and allocation, increasing aggregate human wealth while allocating that wealth more fairly.

Even if they don’t believe in the international capitalist conspiracy, the rationalists see instabilities and confusion in the Free Market and just know they could do better by rationally regulating it. Conclusion: an openly-regulated economy would be a vast improvement over one covertly-regulated, or subject to irrationality. This conceit goes back at least to the French Enlightenment and is the subject of Fredrik Hayek’s book “The Fatal Conceit – the Errors of Socialism”.

I addressed the Manichaean myth of the hidden regulators in earlier essays – the pleasant and self-exalting idea that one is on the side of “good”, fighting against “evil”.

The free market is always regulated: by reality, by competition for scarce resources, and the fact that nobody willingly participates in any transaction unless he believes the transaction will be good for him.

Reality: only some things are possible. Everything of value has limits. Time and other resources used for one endeavor (e.g., to create one product) are unavailable for use on another. Rationalists may have glib arguments otherwise, but reality always wins. The free market operates within, and acknowledges, the realm of the real.

Competition: With all resources being limited, tradeoffs must be made in where to apply any given resource. In the most-free of markets, those who wish to have or use scarce resources must compete with others having the same desires. While perfection is impossible (see Reality), competition tends to move resources to those applications providing the greatest payoff (increase in total wealth) for society. Actions taken in a free market are regulated by the competing demands for scarce resources. Prices are how potential users indicate the value they place on each resource.

Mutual Benefit: in a society with individual liberty, every person is able to walk away from any transaction if he chooses. No one is coerced into offering for sale, buying, lending, or borrowing anything. Free markets are thus regulated by the natural requirement that any transaction must be to the benefit of all parties involved. Transactions structured for the benefit of one party at the expense of others simply don’t happen.

One of the cool things about this regulatory regime is no amount of lobbying can change these regulations, unless the free market is turned into a “not-quite-free market”, that is, the free market is destroyed. In any economic organization other than the extended order of mutual cooperation – the Free Market – regulations are subject to governmental whim and the lobbying, influence-peddling, and rent-seeking that government control always generates.

The regulation of the free market is also impersonal, universal, and timeless. They are laws of nature and laws of human nature. The regulations come about from the decisions of free people, not the intellectual constructs of those who see themselves as smarter and wiser than the rest of humanity.

If you read or hear someone mention the “unregulated free market” they are either ignorant or lying. Probably the former.

Corporatism

…Corporatism, the notion that elite groups of individuals molded together into committees or public-private boards can guide society and coordinate the economy from the top town and manage change by evolution, not revolution. It is a turn-of-the 20th century philosophy, updated for the dawn of the 21st century, which positions itself as an antidote to the kind of messy capitalism that has transformed the Fortune 500 and every corner of our economy in the last half century. To do so corporatism seeks to substitute the wisdom of the few for the hundreds of millions of individual actions and transactions of the many that set the direction of the economy from the bottom up. – “Obama and the Reawakening of Corporatism”, Steven Malanga

Corporatism (Italian: corporativismo) is a political culture in which adherents believe that the basic unit of the society is some corporate group, rather than the individual.[citation needed] Political cultures which hold the individual as the basic unit are called individualistic cultures. The basic unit of the society is what people in the culture consider to be the proper concern of the government. – Wikipedia

Political scientists may also use the term corporatism to describe a practice whereby a state, through the process of licensing and regulating officially-incorporated social, religious, economic, or popular organizations, effectively co-opts their leadership or circumscribes their ability to challenge state authority by establishing the state as the source of their legitimacy, as well as sometimes running them, either directly or indirectly through corporations. This usage is particularly common in the area of East Asian studies, and is sometimes also referred to as state corporatism. – Wikipedia

1932 Doctrine of Fascism:
[The state] is not simply a mechanism which limits the sphere of the supposed liberties of the individual... Neither has the Fascist conception of authority anything in common with that of a police ridden State... Far from crushing the individual, the Fascist State multiplies his energies, just as in a regiment a soldier is not diminished but multiplied by the number of his fellow soldiers. – Wikipedia

Corporatism
Noun
organization of a state on the lines of a business enterprise, with substantial government management of the economy – The Free Dictionary http://www.thefreedictionary.com/corporatism

‘…state capitalism "has introduced massive inefficiencies into global markets and injected populist politics into economic decision-making," that "deeper state intervention in an economy means that bureaucratic waste, inefficiency and corruption are more likely to hold back growth," and that politicians tend to develop stimulus packages with their constituencies, not economic efficiencies, in mind. Therefore, he says, the state must eventually retreat. He probably is wrong because he underestimates the pleasure politicians derive from using their nation's wealth as a slush fund for purchasing political advantage.’ From George Will’s column 10 May 2009

‘In Democracy in America, Alexis de Tocqueville anticipated people being governed by "an immense, tutelary power" determined to take "sole charge of assuring their enjoyment and of watching over their fate." It would be a power "absolute, attentive to detail, regular, provident and gentle," aiming for our happiness but wanting "to be the only agent and the sole arbiter of that happiness." It would, Tocqueville said, provide people security, anticipate their needs, direct their industries and divide their inheritances. It would envelop society in "a network of petty regulations — complicated, minute and uniform." But softly: "It does not break wills; it softens them, bends them, and directs them" until people resemble "a herd of timid and industrious animals, of which the government is the shepherd."’ – ibid.

Conclusion:
Are you a cog in the greater machine, existing and struggling and suffering and dieing for the benefit of the nation (or humanity as a collective), or are you a sovereign individual with a unique soul, feeling your own pain and experiencing your own joy, owning your own body and your own efforts?

The Fascists and Communists have one opinion about this. What is yours? Listen to political speeches and decide for yourself where the speaker stands on this.

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