‘Free Market’ Double Standards

Free market economists/libertarians spend a lot of their time reacting against proposals, often mixing up technocratic discussions with ideology (something for which we can thank Milton Friedman). The result is that they often contradict themselves somewhere along the line. Here are a few examples:

1. Voluntary cooperation is justified and produces superior outcomes, except when people join unions.

2. People maximise utility and should be free to do what they want, except when they vote.

3. Rational self interest is to be celebrated and encouraged, but should be ridiculed in the case of envy.

4. Rational self interest is optimal for society, except in the case of political movements.

5. Local knowledge is how we should process information, except when we’re talking about inequality.

6. Excessive wages are bad and cause unemployment, but CEO pay is always justified.

7. Voluntary exchanges are always just and right, but not in the case of fractional reserve banking.

8. Protecting people from risk with benefits, deposit insurance and consumer protection is bad – what are limited liability laws?

9. Government funded job creation is unnatural and inflationary, but throwing money at banks is not.

10. Bail the banks out, but any subsequent tightening of regulation is an invasion of the free market.

11. The broken window fallacy is always a fallacy, but creative destruction is a vital part of capitalism. (That particular book is linked because he puts Schumpeter and Hazlitt right next to each other, apparently without realising the irony).

12. Top-down planning is bad, but we should never question the actions of corporations.

13. Public debt needs to be attacked, but private debt doesn’ t matter – let’s increase it.

14. Obama is a Socialist! But eliminating oil company subsidies is un-American.

15. Left wing governments make people dependent on welfare for votes, but drug companies doing something similar should be ignored.

16. Public choice theory means the government can’t do anything right, but it doesn’t apply to economists themselves.

17. Capitalism is stable. But when the government doesn’t intervene we can blame them for the Great Depression (and also the Great Recession).

18. State intervention is bad, but the government should increase interest rates to stop wage inflation.

19. Nudging people is wrong, but we shouldn’t regulate advertising and packaging. (OK, this one is probably based on the fact that most haven’t read or don’t understand Nudge).

20. Investors need to be confident about the future. No, we shouldn’t shore up their confidence by injecting money into the economy! What on earth…

21. If the government spends money it will crowd out private investment. If the private sector spends money it won’t crowd out other private sector investment.

22. Committee think is a terrible way to do things. But shareholder value capitalism is the best system ever designed.

23. Aggregate demand is a meaningless concept, but Say’s Law still holds.

24. And of course, the classic: government shouldn’t interfere in people’s lives, except when it’s telling them exactly how to behave.

 

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  1. #1 by richard lawson on November 18, 2011 - 11:24 am

    Great post.
    In short, private enterprise is always good, public enterprise is always bad.

  2. #2 by BobbyFlint (@BBFlint) on November 18, 2011 - 5:59 pm

    Excellent post. Lots of quality links in there.

  3. #3 by Greg on November 22, 2011 - 3:09 pm

    Nice!

    Ill add one although its not strictly economic.

    Claims about “left wing social engineering” while right wing social engineers (aka priests and pastors) like Huckabee, Robertson run for president and others like R Warren are busy electioneering.

  4. #4 by Unlearningecon on November 24, 2011 - 6:59 pm

    Thanks for your comments. It’s disturbingly easy to rattle these off once you get going – maybe one day I’ll do another.

  5. #5 by zeitgeistnbstyle on November 27, 2011 - 4:29 pm

    One only needs to know the definition of economy to understand we have lost our way in ANY free market system i.e. capitalism.

    Economy:
    “Careful, thrifty management of resources, such as money, materials, or labor”
    “An example or result of such management; a saving.”
    “Efficient, sparing, or conservative use”

    John Locke with his argument for property:

    There must be enough left over for everybody
    You must not let it spoil
    And you must mix your labour with it.

    Today although there is enough to go around there is not enough money
    Today we consume at an alarming rate with things spoiling right and left; just look at our dumps.
    Today we have jobs that are meaningless just to hold on to a capitalistic system i.e. investors/brokers moving money from point A to point B and making money doing so. And this goes alone with all the other uninspiring mundane jobs which pollute our society ever insulting the human being.

    @Zeigtgeistnb

    • #6 by Unlearningecon on November 27, 2011 - 7:49 pm

      In many ways I am in agreement with you. Our form of capitalism has always involved collusion between banks, landlords, big business and government – you could in some ways argue that it has never been ‘capitalism’ as one might envisage it. However, you need to understand systems in their historical context and I don’t think you can excuse capitalism on the grounds that it isn’t quite the capitalism you dream about.

  6. #7 by Christopher Adderley (@chrisadderley) on November 28, 2011 - 1:41 pm

    “1. Voluntary cooperation is justified and produces superior outcomes, except when people join unions.”

    This first point is incorrect and a misrepresentation, certainly with respect to the ideas of Milton Friedman.

    Milton Friedman was indeed against coercion/the use of force and greatly believed in the maximum freedom amongst individuals to come to voluntary arrangements amongst themselves.

    His argument against Unions was fundamentally it gave rights to one group of individuals at the expense of other individuals. It therefore restricted the freedoms of the public at large. This is entirely consistent with his first principle. Where is the contradiction?

    It is not a voluntary system if people obtain the means through government to obtain privileges for one group of people at the expense of the people at large!

    You make a profound error in your statement and I hope with time you will learn to explore more fully your ideas before you pass judgement on such a great man!

    • #8 by Unlearningecon on November 28, 2011 - 1:54 pm

      The point wasn’t explicitly aimed at Milton Friedman – some on the right are indeed consistent in their support for freedom of association. However, there are many who are all too ready to denounce unions/strikes that have little to do with government granted privileges, far more easily than they would denounce a corporation restricting supply or getting involved in fraud. Witness attitudes towards the unions in the 70s versus attitudes towards the banks now – I see very little criticism of the banks from the right, when in reality they should be regarded as an abomination by everyone.

      • #9 by Christopher Adderley (@chrisadderley) on November 28, 2011 - 2:13 pm

        Yes it bloody was. You highlighted his name at the top of the article! I have the greatest respect for people who are exploring their knowledge and I admire your effort in creating this website etc. I know that your intentions are good!

        But my god man this politics is rubbish. Don’t try and ridicule the immense intellect of a superb individual. Hundreds of millions of people have been lifted from poverty in recent years. Hundreds of millions. Partly thanks to Milton.

        You don’t think a state pension is a Government Granted privilege? Are you on drugs? It’s a direct privilege! It’s in many cases far superior to private sector pensions! And who pays for it? Who bears the cost? Government doesn’t bear the cost! People bear the cost! Only people can pay taxes.

        I think your justification that two wrongs make a right is weak at best. I don’t support fraud. Which corporation is restricting supply? Why do they want to do that?

        I think when you say “banks” you forget the most important banks of all “central banks” and we do make the biggest criticism of all! We believe if a fool lends to another fool – they should bear the cost of it! Moral Hazard. Of course.

      • #10 by Unlearningecon on November 28, 2011 - 2:20 pm

        Read it a bit more carefully and you’ll see that the points were not aimed specifically at him, I just mentioned him. I’m not trying to ridicule anyone.

        ‘Hundreds of millions of people have been lifted from poverty in recent years. Hundreds of millions. Partly thanks to Milton.’

        Not true at all. Outside China (a massively statist country) poverty in the developing world has increased over the past 30 years. IMF ‘neoliberal’ programs have an awful track record.

        I honestly don’t know why you’re talking about pensions. Everybody needs a pension and public ones are naturally going to be partially state funded. The disparity between the public and private sector is pretty small and simply not something we need to worry about.

        ‘I think your justification that two wrongs make a right is weak at best. I don’t support fraud. Which corporation is restricting supply? Why do they want to do that?’

        Eh? I didn’t say that. The point of this post was pointing out the right’s blind spots, which they appear to have with corporations. As I said, I rarely see them denounce banks in the way they are prepared to with unions.

        Your CB point highlights the fact that libertarians find it incredibly difficult to criticise a private body – they always have to fall back to a public one. That’s why half of them have suddenly become Austrians rather than Keynesians since 2008.

      • #11 by Christopher Adderley (@chrisadderley) on November 28, 2011 - 2:25 pm

        “poverty in the developing world has increased over the past 30 years”

        By what definition? Have you been out of the country?

        I spend time in Brazil every year – I can assure you the world moving forward whether you believe it or not.

      • #12 by Christopher Adderley (@chrisadderley) on November 28, 2011 - 2:27 pm

        I think you should read my comments more carefully.

        You continually attack the straw man with anecdotes.

      • #13 by Christopher Adderley (@chrisadderley) on November 28, 2011 - 2:31 pm

        Everyone knows the IMF is shit. It’s full of economists who think like you. Think that the organisers can create some utopian existance – its not reality.

        The biggest bunch of organisers are in the EU and the IMF has become even more corrupted by it…

        The IMF broke its own rules when it helped Greece. Where was the currency devaluation? …

      • #14 by Christopher Adderley (@chrisadderley) on November 28, 2011 - 2:32 pm

        “The disparity between the public and private sector is pretty small and simply not something we need to worry about.”

        Yes ‘master’…

  7. #15 by Christopher Adderley (@chrisadderley) on November 28, 2011 - 2:02 pm

    Your article is nothing to do with Libertarianism. You have an extremely skewed view of what us Libertarians believe and the level of contradictions in your article is quite astounding.

    My personal opinion is that it would be a great article to use by the Libertarians to correct many of the misconceptions that people have by accepting two similar/seemingly opposing ideas to be true statements of the views…

    It seems rather odd that you do not seem to acknowledge that very intelligent people have studied these concepts at great length and the points you make are just the beginning of the discussion and not the end… the conclusion/summary of a debate.

    You are extremely confused throughout your blog by the word “capitalism” and many students are. It is not an “ism” at all.. And to some extent ALL forms of society are capitalist, whether they are socialist, communist or what have you.. The question is : who controls the capital?

    If you grow some vegetables in your garden – this is capitalism. Failure to acknowledge that simple fact is entirely unforgiveable.

    A lot of what you discuss is very dangerous and the professors who teach junk economics at Sussex University are partly to blame for the situation today. Control control control… the “vision of the anointed” … their “crises” and their “solutions” .. ‘oh wise masters..’… ‘we need you’.

    Read ‘When Money Dies’ – because if you want to destroy a society…

    • #16 by Unlearningecon on November 28, 2011 - 2:12 pm

      ‘Your article is nothing to do with Libertarianism. You have an extremely skewed view of what us Libertarians believe and the level of contradictions in your article is quite astounding.’

      This is a standard accusation of neoclassical economists/libertarians – dismissals and accusations of ignorance, contradictions, without pointing out a single one.

      ‘You are extremely confused throughout your blog by the word “capitalism” and many students are.’

      Libertarians are confused by the word capitalism because they think it is what happens naturally, when in fact that simply isn’t the case. Capitalism was always planned by vested interests and workers were initially forced into factories by the state.

      Capitalism is indeed a hard word to define – I guess the best definition is private ownership of the means of production. In that sense socialism and communism are *not* capitalism, unless you have a definition of capitalism that is so vague as to be useless.

      ‘A lot of what you discuss is very dangerous and the professors who teach junk economics at Sussex University are partly to blame for the situation today.’

      I don’t go to Sussex University.

      ‘Control control control… the “vision of the anointed” … their “crises” and their “solutions” .. ‘oh wise masters..’… ‘we need you’.’

      This is one of those things that is almost too silly to warrant a response. Nobody is suggesting controlling people’s lives.

      • #17 by Christopher Adderley (@chrisadderley) on November 28, 2011 - 2:15 pm

        You do not realise to the extent that your original comments are exactly the same. You make numerous ‘dismissals and accusations of ignorance, contradictions, without pointing out a single one.’

        I don’t believe your points are valid. I explained the first one. I don’t have time to go through them all.

      • #18 by Christopher Adderley (@chrisadderley) on November 28, 2011 - 2:18 pm

        “This is a standard accusation of neoclassical economists/libertarians”

        I suggest you read a book called “The Vision of the Anointed” by Thomas Sowell and you will better understand my comment.

      • #19 by Unlearningecon on November 28, 2011 - 2:28 pm

        You are throwing a lot of accusations out there but being quite vague. I responded to your criticism of my first one: the fact is that many on the right turn a blind eye to state intervention against labour but get up in arms when it’s against business.

        I provided links for a good deal of my points so to accuse me of straw manning libertarians is a bit daft.

        Look, maybe that’s a good book. But every libertarian book I’ve read is just blind sermonising and the title of that one leads me to believe it is too. I’m familiar with libertarian narratives about ‘leaders ruling us’ and ‘making everything great for everyone’ etc. and I don’t find them convincing.

      • #20 by Christopher Adderley (@chrisadderley) on November 28, 2011 - 2:34 pm

        You do not define a business in the same way as we do. We believe business is a voluntary interaction for the most part and you proceed in your arguments AS IF it is not.

        So that is why I say, you are attacking straw men. Very often you proceed AS IF something is a ‘given’ and it is simply not the case…

        It’s a good book. Give it a go you might enjoy it.

      • #21 by Christopher Adderley (@chrisadderley) on November 28, 2011 - 2:39 pm

        Ok a little further explanation so i don’t get accused of being vague.. with respect to the market..

        When talking about intervention in business we consider the third party effect .. that is we consider the normal market transaction between two bodies to be a negotiation of terms and ultimately an exchange to the benefit of both parties.

        If you introduce a third party you require a third body to be happy with the terms of the transaction. You effectively reduce the number of different possible terms. This is one of the reasons we believe regulation restricts businesses. for example.. any way i’ve got to go back out..

        Regards.

  8. #22 by Unlearningecon on November 28, 2011 - 2:45 pm

    Chris,

    Honestly I welcome criticism but I think you need to take stock a bit – I’ve obviously hit a nerve and you’re replying in a lot of small posts which makes it difficult for me to respond properly.

    – Some Latin American countries have done OK but particularly in Africa, things are not going too well and poverty has increased. My source is Joseph Stiglitz’ ‘Globalisation and its discontents’. The IMF is full of neoclassical economists who impose ‘free market’ policies on countries. If you are against this and prefer democracy, I’m with you. But you have to acknowledge the relative failure of these policies in creating growth.

    - As I said before, accusations of straw manning hold very little water given the amount of links I provided as evidence. I fail to see where I have used anecdotes, unless you define an anecdote as an example of a libertarian saying something I’m accusing them of saying, which obviously makes it the opposite of a straw man.

    - Corporations have always been defined by the state and it wasn’t until joint stock companies were defined legally that ‘capitalism’ as we know it really took off. You’re still evading the issue, however, which is that the right are often more willing to denounce labour movements than corporations, which was my original point.

    - You have a strange anti-government bias that I will simply never grasp. Referring to me as master is just plain weird and accusing me of trying to plan some sort of utopian existence just demonstrates quite how tinned your libertarian responses are. There are few things that you have said that I have not seen before.

    - Your definition of exchange is again, the standard ‘interactions are voluntary otherwise people wouldn’t do them.’ I’ve heard it many times before and it is verging on tautological. In reality, people are strongly affected by culture, advertising, framing, power structures and so forth, and a slightly more nuanced analysis of exchange is required.

    - The book has good reviews so I will take a look.

    • #23 by Christopher Adderley (@chrisadderley) on November 28, 2011 - 4:54 pm

      “I think you need to take stock a bit” …

      You mention a book – which I own and have read most of – it wasn’t very good. I am far more interested in Stiglitz earlier work on tax theory …

      I have to make decisions based on the real world. I am good at it. I will stick to that and I wish you every success in your life.

    • #24 by Christopher Adderley (@chrisadderley) on November 28, 2011 - 4:55 pm

      PS: I am not anti-government but if I was leading the country i would make Margeret Thatcher look like the tooth fairy.

    • #25 by Christopher Adderley (@chrisadderley) on November 28, 2011 - 4:56 pm

      Good heavens! sorry.. Margaret*

    • #26 by Christopher Adderley (@chrisadderley) on November 28, 2011 - 5:15 pm

      Sorry I can’t resist to give you a better response…

      “Some Latin American countries have done OK but particularly in Africa…”

      Africa is a Continent not a Country. For example : How fast has Nigeria been growing in recent years? Have you been there? Secondly, Latin American countries such as Brazil, particularly under the administration of Fernando Henrique Cardoso, inacted sensible macro reforms. Unfortunately Lula made no such reforms. And please note particularly with respect to our conversation earlier , public sector pension reform was enormously important in that respect. Look into it, perhaps read a book called “the accidental President of Brazil” – it is very good.

      “As I said before, accusations of straw manning hold very little water given the amount of links I provided as evidence.”

      You didn’t provide evidence. Yes you did provide links but the relationship between the two points in any given point is a matter for an entire discussion – not a bulleted point that gives the two subjects the relationship that you decide that it has – thats not “evidence”.

      “Corporations have always been defined by the state…”

      What is that even supposed to mean? Legal Status? Corporatism – which Libertarians certainly do not support.

      “Anti-government” – earlier comment

      Finally the most interesting remark you made…

      “Your definition of exchange is again, the standard ‘interactions are voluntary otherwise people wouldn’t do them.’ I’ve heard it many times before and it is verging on tautological. In reality, people are strongly affected by culture, advertising, framing, power structures and so forth, and a slightly more nuanced analysis of exchange is required.”

      Indeed there are many cultural influences – but where did they come from? From the sky? They come from the people – they are a manifestation. Again we do not argue that there is a Utopia available.

      Are people largely free in a society of advertising? Should you be free to decide what is good and bad advertising? What is right/wrong for certain people? Is it right for people to elect a power that decides it is wrong to be gay? Or to assign a status to certain people? Perhaps you suggest that some people are ‘ignorant’ or not as ‘able’ as yourself to decide between what is ‘right’ and ‘wrong’? A very dangerous and slippery slope.

      If you look at gay rights it is a classic problem caused by the masses exerting a control through Government which is unacceptable to the Libertarian. Why should the majority decide what is ‘right’ for a minority.

      And thats where we clash – I believe ultimately what you decribe is to assign status to classes of people. I wish people to be free of those constraints and I believe they are best able to do that under conditions of maximum freedom. I am not an anarchist – murder is unacceptable. But locking people up taking drugs is absolutely ridiculous.

      • #27 by Unlearningecon on November 28, 2011 - 5:49 pm

        ‘Africa is a Continent not a Country. For example : How fast has Nigeria been growing in recent years? Have you been there?’

        I didn’t say Africa is a country and the fact that I haven’t been to Nigeria is irrelevant. I really don’t want to get into the efficacy of various policies for development because it is not the main issue here.

        ‘What is that even supposed to mean? Legal Status? Corporatism – which Libertarians certainly do not support.’

        It’s not corporatism but as entities they have been defined by the state and capitalism didn’t really take off until this definition was strong. It’s a bit of a libertarian fantasy that all we need for growth is ‘property and contracts’ or something along those lines.

        ‘You didn’t provide evidence. Yes you did provide links but the relationship between the two points in any given point is a matter for an entire discussion – not a bulleted point that gives the two subjects the relationship that you decide that it has – thats not “evidence”.’

        I *did* provide evidence that libertarians were saying the things I attributed to them. And again there is no substance – you are just insisting my points aren’t linked without pointing out any actual logical holes.

        Again, your entire last few paragraphs are based around the idea that people are ‘free’ with as little government as possible and completely ignores power structures. Culture doesn’t come from the sky or the people; much of it is affected by the actions of relatively few.

        The idea that the state is deciding for people by intervening is also false, as it is based on rational economic man. As Thaler and Sunstein detail, people are affected by certain biases and their behaviour is influenced all the time. Unfortunately, there is no neutral policy.

        Chris, you have been pretty polite and I’m grateful for some of your comments. But rereading half of your stuff it’s like you are sermonising me – long speeches on freedom, etc. You still have yet to address almost any of the main points I made in the post.

        You bring up too many issues to count and the result is a mish mash of arguments, and some really long posts. This is what always happens in arguments with libertarians and it’s amazing that they don’t realise what they’re doing – it’s incredibly tiring to go over the same stuff again and again with them.

  9. #28 by BobbyFlint (@BBFlint) on November 28, 2011 - 6:30 pm

    Chris: Off-topic, but you wouldn’t happen to post under the pseudonym “Major Freedom”, would you? Or perhaps I’m confusing you with someone…..

  10. #29 by Wheylous on January 18, 2012 - 8:58 pm

    “9. Government funded job creation is unnatural and inflationary, but throwing money at banks is not.

    10. Bail the banks out, but any subsequent tightening of regulation is an invasion of the free market.

    You must be confusing libertarians with Republican Socialists.

    • #30 by Unlearningecon on January 18, 2012 - 11:57 pm

      This post wasn’t aimed directly at libertarians – it was aimed at ‘free market’ proponents, a category in which Republicans often place themselves.

      Furthermore, if you offered the average libertarian the choice between:

      a) A bailout and tightening of regulations and

      b) A bailout and no tightening of regulations

      they would prefer b), probably on ‘free market versus government’ grounds.

      • #31 by Wheylous on January 19, 2012 - 12:16 am

        When did we ever buy the popular fallacy that Republicans are market advocates?

      • #32 by Unlearningecon on January 19, 2012 - 12:33 am

        I think the fact that they aren’t is a symptom of a bigger problem of the ‘free market’ being incredibly subjective and its proponents simply seeing it wherever they want to. See Ha-Joon Chang:

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