Sunday, September 13, 2009

What Can We Expect From the Free Market?

All that the free market guarantees is that individuals may pursue their own values. To the extent that the market is not free, some individuals are able to pursue their values at the expense of others.

The free market is essentially an individualist utilitarian environment in which one maximizes utility. This environment is different from that of classical utilitarianism in that it is not political. Policies are not set and imposed on populations through some fantastic calculation or estimate of costs and benefits, but are lived by market participants with profit and loss being the sole arbiter of success and failure.

In such an environment, experiments are welcome and the failures affect only the participants - not society at large. It is unfortunate that Karl Popper, if Bryan Magee can be taken at his word, believed that the best society was one in which problems could be solved most rapidly through experimentation and falsification of wrong theories, but never fully embraced the free market as the appropriate avenue to do that.

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Jon said...

Could the state be viewed as a result of the free market - albeit imperfection of the free market - where people view a need for a state?

Brian J. Gladish said...

Jon, that is a perceptive question that certainly demands an answer.

I would say that the state is a result of the market, rather than the free market. What I mean is that the market is the web of interactions, voluntary and involuntary, among humans, while the free market is that subset that is voluntary. The state exists because enough people still believe that having a state produces outcomes that serve their self interest, and they have the clout to impose it on the rest of us without our consent. Note that the state does provide "services" that people desire -- primarily security -- although it provides them in a way that tends to be destructive, even if well-intentioned. As someone who taught me a lot once said, "The ideological demand for security is met by a political supply of tyranny."

The unqualified market does allow opportunities for learning, although not as much as the free market, and that learning process will, hopefully, bear fruit in the future. We can have some confidence looking at the gradual adoption of new ideas in the course of history, although it remains to be said that there is no guarantee of constant improvement.