Free us from the F-word

The Templeton Foundation asks: “Does the free market corrode moral character?” Thirteen writers answer with mini-essays (via Norm).

Probably at least some of these are interesting (I have yet to find out), but my beef is with the implication in the wording of the question.

The use of the phrase ‘free market’ is almost always misleading: free markets do not exist. For a market to function, there needs to be a set of regulations (property rights, contract law), defined and enforced by the state.

Beyond this bare minimum, in practice all governments of any political hue keep a large body of other regulation in place. Most obviously, there are restrictions on trade in weaponry and drugs, and then even the most deregulatory regimes still have some set of statutory labour rights, as well as laws relating to the formation and abuse of monopolies – not to mention the taxes levied on transactions.

Nobody within shrieking distance of the mainstream in any developed economy favours completely free (or even, if you prefer, maximally free) markets; the debate, rather, should be about how markets should be regulated. Not, by the way, ‘how much’ regulation there should be or ‘how free’ the market is – there’s no sensible way to quantify it. There’s nothing that could count as ‘overall market freedom’, of which France has this much and the USA that much; there’s just an indefinite list of market practices that may be either permitted or restricted in some way. (The World Bank does have an Ease of Doing Business index, but this is just an aggregate of a few particular pro-business indicators – one of which is how well contract law is enforced…)

The notion that there’s such a thing as ‘the free market’, which one is either for or against, is one of the many verbal traps that dull public debate.