Thursday, October 16, 2008

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.


Chris said...

I always took it to be free vs. planned, not free vs. regulated. I take it you don't have similar problems with freedom of speech, freedom of religion, freedom from want and freedom from fear even though they might not encompass an impoverished arachnophobic human-sacrifing Baal worshipper shouting 'fire' in a crowded theatre?

I think you're correct in that when terms are used as shorthand, inaccurate assumptions grow as to what they really mean (although it looks like the essayists have to an extent used their own definitions, as well as oftentimes quotes round the term to show that it's problematic), and definitely correct in the importance of regulation and whatnot, but it also seems a little you can't make war on a noun-eqsue to say that it's almost always a misleading term.

Tom Freeman said...

Free speech is an interesting parallel. Most people will say they believe in 'free speech within limits', with those limits related to shouting 'fire' in a theatre, slander, incitement to violence and that sort of thing.

But quite a few talk about 'free speech used responsibly', getting into anti-religious rudeness. And they often seem to want 'responsibility' to be legally enforced. The formula lets them do this while still presenting themselves as pro-'free speech'. So I think that phrase misleads too, sometimes deliberately, in this context.

Maybe this is less than a vital issue, but such are the bees that frequent my bonnet...