All Commentary
Monday, March 3, 2014

Papal Indulgences and “Impersonal” Markets

Markets might be impersonal, but at least they don’t require coercion

The worship of the ancient golden calf . . . has returned in a new and ruthless guise in the idolatry of money and the dictatorship of an impersonal economy lacking a truly human purpose.

—Pope Francis

Critics have long attacked market systems as being “impersonal.” The implication is that markets somehow violate morality by treating others merely as means rather than as valuable ends in themselves. In Pope Francis’s first apostolic exhortation, he jumped on that bandwagon by criticizing market systems as representing “the dictatorship of an impersonal economy lacking a truly human purpose.”

Attributing the term “dictatorship” to market systems is sure to produce confusion. So what are markets anyway?

Markets are what results when people are free to choose how to associate with one another in the absence of coercion. The only “dictatorship” is the restriction that such arrangements be voluntary. That clearly advances human purposes—those of each individual involved in an exchange. It is surely an odd sort of dictatorship that consists in people not dictating choice to others.

Market systems have no purposes or intentions of their own, beyond facilitating participants’ social cooperation. As soon as we move beyond broad generalities, we recognize that people disagree about who should have what kind and how much of virtually every good or service. But some people believe the economy should reflect a particular purpose, which assumes universal agreement on ends and ignores the inherent disunity of different people’s desires and needs. As a consequence, pursuit of a particular social purpose requires the imposition of coercion by some over others.

Confusion also arises when critics treat market arrangements as if they comprise all social interaction. If market systems existed in isolation from other societal arrangements, they could indeed be characterized as uncaring. But they are only a part of a larger society, which includes all kinds of non-market phenomena, like communities, charities, and religious organizations.

Still, those societies that rely to a greater degree on voluntary market arrangements produce far more wealth with which to assist others. And they do not simply ignore poverty and injustice, but use substantial resources to offer many types of aid and assistance to the most vulnerable among us. And yet as the government grows in the social sector, the voluntary sector shrinks.

Further, the capitalist system, despite being deliberately misnamed to imply that only capitalists “win,” directly benefits workers of all ability levels by increasing their productivity and earning potential. As economist Paul Heyne put it:

The poor receive less income than the rich in a market system; but the rise of market systems has arguably conferred its largest benefits on the poor, making the poverty of those who are least well off under a market system the envy of people in societies where markets have not flourished.

Then there is the confusion of people with products. In every market exchange, both parties treat the goods or services offered by trading partners as means to their ends; inputs to use in pursuing their ultimate purposes. But that is different from treating their trading partners as such. In fact, since both parties to a voluntary trade are better off than they would otherwise have been (or they would not agree), they both advance their partners’ ends. And they do so in spite of the handicap that faces all of us almost all of the time—a lack of sufficient knowledge of what would best serve our trading partners—because it puts that decision in their hands rather than ours. Without the ability to make use of their own superior knowledge about what they value and what trade-offs they are willing to make, our ability to advance their ends would be seriously hamstrung, and they would be worse off.

Then there’s the argument that markets increase the isolation of human beings from meaningful relationships. They certainly allow impersonal relationships for those who desire them—which they often do, making possible vast gains to all through worldwide specialization and exchange.

But economic freedom in no way imposes the requirement that exchanges and relationships are entirely impersonal. To recognize this, one need only notice the many cases where employees, employers, vendors, and customers also share friendships. Their interactions are neither impersonal nor socially isolating.

We can deal with others in any way we choose under market systems, as long as we do not violate others’ rights. For example, nothing stops a restaurant or grocery store owner from offering food as a charitable gift to someone who cannot afford to buy it or acting as a sponsor for any number of charities or community organizations. And nothing in market economies prevents people from forming cooperative societies.

Similarly, nothing about market systems restricts the bedrock social community: the family. That community of those we know well and love is primarily comprised of non-market behavior. In fact, little could be more impersonal than substituting the family’s ability to take care of its own with the State’s disbursal of a portion of the same resources. 

The same is true of personal relationships with others in churches and voluntary organizations. Market relationships erect no barriers to such community relationships. 

Restricting markets does not mean that what would take their place would be caring, personal relationships—it may well be abuse of others by governments (as so dramatically demonstrated by our past century’s experience). Overriding the voluntary arrangements people create for themselves means depriving them of their liberty and forcing them into collectivized alternatives they do not choose. That in no way guarantees a more loving or caring society. That cannot be created by force.

It is true that some market institutions, such as stock exchanges and futures markets, are impersonal in a specific sense—yet that does not hinder their ability to reflect people’s particular desires and circumstances. In fact, they would not have developed, nor continued, unless large numbers of individuals valued the gains they could realize that way. After all, people don’t adopt stock exchanges and financial markets against their will.

In this sense, then, markets are far from impersonal. They reflect every aspect of economic arrangements that people have preferences about. As Leonard Read expressed it in “Leave it to the Free Market:”

The free market is intimately personal . . . persons deciding each for himself what to produce, where to work, what to buy and sell, and what are to be acceptable terms of exchange. I, who know more about me than anyone else, in charge of me! How possibly can a way of life be more intimately personal than each individual his own decision-maker!

People’s preferences and circumstances change, of course. Free markets accommodate these changes without violence, via prices. In contrast, government imposition ignores a vast array of people’s preferences and hinders adjustment in the face of change. In Read’s words:

The market . . . continuously and automatically moves ever-changing satisfactions and ever-changing aspirations—supply and demand of particular goods and services—toward a harmony one with the other. . . .

The alternative to the free market is the rigged, planned, dictatorial, coercive, interventionist, authoritarian market, variously known as the planned economy, the welfare state, omnipotent government . . . disruptive and antisocial . . . of necessity forcing ever-changing satisfactions and ever-changing aspirations toward a state of disharmony one with the other—shortages of this, surpluses of that . . . [ignoring] your countless and ever-changing preferences or what constitutes your idea of your welfare. 

This is particularly important, since market critics assert that not only are markets impersonal, but “unjust.” That compounds the confusion with a false standard of justice. It ignores the fact that the only way to determine economic justice in the eyes of the parties involved in a relationship is what they voluntarily agree to. Mutual gainers don’t complain about their voluntary dealings imposing injustice on them.

What about the results of market arrangements? Are they inhumane, as critics sometimes claim? That claim is really a statement that people are less other-focused than those critics wish they were (and usually that somehow the critics’ own pet alternative will magically usher in a more humane humanity).

But that doesn’t address the question we actually face: how to best organize society for people as they are. It is like twisting James Madison’s “If men were angels, no government would be necessary” to blame the form of government chosen for every way people fall short of being angelic. In fact, however, human kindness will be greatest when people are the freest and most self-responsible, because freedom offers the greatest potential for personal and moral growth, a possibility deadened by every form of coercive government “charity.” 

Human beings want to assist those in need. Far from undermining that humanity, impersonal markets extend the number of people who are able to assist. Our lifespans are too short to build true friendships with all the people who could help us improve our lot. If we had to rely only on our personal relationships, it would necessarily limit the extent of assistance possible. But when changes in any of a wide range of circumstances alter prices in impersonal markets, they give everyone on earth who could benefit from helping you—whether they know you or care about you, and even when they might dislike you—increased incentives to do so. And that benefit complements assistance from friends and family members; it does not supplant it.

The qualms over markets’ morality are unjustified. And the “solutions” put forward would undermine the very arrangements that have enabled the creation of our current level of civilization.

Supposedly suspect market arrangements advance the ends of others, even those we do not know, rather than sacrificing them as mere means to our ends. In contrast, government interventions, despite their boilerplate rhetoric, frequently treat citizens impersonally as little more than means to the ends imposed upon them by their rulers.

And there is perhaps nothing more impersonal than such an imposition. 

  • Gary M. Galles is a Professor of Economics at Pepperdine University and a member of the Foundation for Economic Education faculty network.

    In addition to his new book, Pathways to Policy Failures (2020), his books include Lines of Liberty (2016), Faulty Premises, Faulty Policies (2014), and Apostle of Peace (2013).