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Thursday, July 23, 2015

Don’t Worship the Free Market

Faith in Freedom Need Not Be Blind

“I’m tired of hearing that ‘liberty’ will take care of it!”

My young friend was explaining to me why she’s become less enthusiastic about libertarianism than she was a few years ago. I suspect she speaks for many smart young people who are just learning about libertarianism and getting a lot of bumper sticker ideas. Our belief in human freedom can strike them more as religious doctrine than as reason.

“Liberty Will Take Care of It!”

I had been pointing out a building going up in my neighborhood that blocked a significant part of the public’s view of the Brooklyn Bridge. I said something to the effect that, if it were up to me, I’d lop off the top three floors of that thing because many, including myself, feel it exceeds the limit agreed to with local community organizations, and I thought there was probably some misrepresentation going on.

That’s when she told me how tired she is of the standard libertarian refrain: every time some social issue comes up in her discussions with libertarians — spillovers, poverty, inequality, health care, racial discrimination, the environment — their response is that the free market will solve the problem.

Liberty Is Not a Shut-Up Argument

There are libertarians who do simply chant the free-market mantra. They insist that market exchange and private property can solve all our problems — but they can’t, and we shouldn’t expect them to. (See my earlier Freeman articles “Property Rights Aren’t Always the Libertarian Solution” and “Moving Beyond Free-Market Minimalism.”)

My faith in freedom isn’t blind. It’s not really a form of faith, either — more of a shorthand for my understanding of theory and history.

Suppose, for example, that 50 years ago, when AT&T still had a government-granted telephone monopoly in the United States, someone asked how phone service could be provided by private companies that didn’t have that legal privilege. How, without eminent domain to take private property for those essential telephone lines and exchanges, would people be able to make and receive calls from their homes and businesses?

Fast-forward to today and we see practically every person over the age of 13 (and quite a few much younger) in the developed world carrying a cell phone or a smartphone small enough to fit in their pocket that combines telephone, Internet service, and a video camera. There are no cumbersome telephone poles, cables, or exchanges, and there’s not much eminent domain. The 1960s question was, “Who will build the heavy telephone infrastructure?” Today, who needs a heavy telephone infrastructure?

To say that liberty will take care of a problem need not be a shut-up argument, and it shouldn’t be used that way. But a free market operates on the principle that as long as people don’t initiate physical violence or fraud against anyone, anything else is okay.

To say that liberty will take care of a problem need not be a shut-up argument, and it shouldn’t be used that way.


That’s “okay” in the sense that, although you may not approve of what goes on, you are willing to tolerate it because it doesn’t infringe on your rights to your person or property. In that sort of social and psychological space, almost anything can happen. Smartphones can be invented. Medical centers can open in Walmarts, and urgent care facilities can pop up in city storefronts. Facebook and Google can emerge. Thousands of craft breweries and coffeehouses, serving beverages immeasurably superior to anything you could find even 25 years ago, can open their doors. We could each name countless other examples.

In that sense, the free market not only takes care of the problems we’re aware of; it also reveals flaws and gaps that we would otherwise never know existed.

The Seen and the Unseen

We who support the freedom philosophy are always at a disadvantage when arguing against interventionist proposals to provide nationalized health care, to impose regulations to address climate change, and the like precisely because appreciating and understanding the open-endedness and unpredictability of the social order are central to our political philosophy.

It’s easy to see an individual’s hourly pay go up from $7.25 to $15.00 after new legislation raises the minimum wage. It’s harder to see that she no longer gets tips, or that her benefits are lower — or that someone else, someone who is less skilled, is now going to have an even harder time finding a job.

If AT&T had retained its legal monopoly until today — as the US Postal Service has — we might see every home with a handset in every room and in every car, but what we wouldn’t see are smartphones. We probably wouldn’t see broadband Internet access in so many homes, either — or wireless hotspots in so many public places.

Unlike many on the left, most libertarians take the limits of human knowledge and reason seriously, so we also take seriously the open-endedness of a liberal social order. Markets can be creative and spontaneous to the extent that billions of resourceful minds at every moment are free to use local, contextual knowledge to discover and address myriad problems large and small, simple and complex. With the right rules of the game — including private property, free association, and the rule of law — the creativity at the heart of that open-endedness will tend to promote social cooperation and well-being. That’s not faith. That’s an understanding of cause and effect in the social world.

But the temptation to substitute planning for spontaneity and coercion for liberty remains ever present because, as Henry Hazlitt argued in Economics in One Lesson, the short-term and local are usually more obvious than the long-term and global. It takes practice to see the unseen.

Quite apart from the morality of taking what belongs to someone else so you can use it for ends you happen to think are more important than theirs, or from banning someone else’s nonviolent actions because you don’t like them — and quite apart from the problems of corruption and cronyism that always accompany even the most well-meaning interventions — to the extent that you accept the practicability of central planning (even limited examples such as minimum guaranteed incomes or the minimum wage), you’re assuming that unpredictable human choices won’t find a way to mess up what you’re trying to do.

That assumption is demonstrably false. And because it’s false, you’ll find yourself encroaching further and further into the lives of ordinary people and constraining and directing their choices more and more in a futile effort to fix the problems caused by past interventions.

It is not a knee-jerk position to defend freedom when coercion’s track record is so bad.

Worshipping the Market versus Worshipping the State

I’m not defending all libertarians. I’ve often heard our critics charge, “You free-market types treat the market like some kind of god that will solve all our ills.” They’re right. Some market advocates do place a blind faith in freedom. Some may even worship the free market as a sort of deus ex mercatum (“god from the market”) that magically and inexplicably solves social problems. That’s perhaps because their commitment to economic freedom is in fact a part of their religious beliefs.

Others, like me, don’t see the need or the wisdom in linking political economy to a religious tradition, even if we do practice one of the traditional world religions. We already have a religion and we don’t need to worship the free market or the state.

  • Sanford Ikeda is a Professor and the Coordinator of the Economics Program at Purchase College of the State University of New York and a Visiting Scholar and Research Associate at New York University. He is a member of the FEE Faculty Network.