Wednesday, May 05, 2021

Define "Free Market"

For years, I have heard liberatarians, conservatives and liberals, people of every stripe, make various statements about "the free market." But none of them define what it is. Some of them seem to think various conditions make a market "un-free", but no one can seem to agree on what those conditions are, nor do any of the conditions they specify seem to make any sense.

For example, how is it NOT a "free market" when the government gets involved in the market? The government is just one more market player that can be duped, played, cajoled into taking or providing capital, just like any other market player. Every player in the market is free to do whatever they want to do. Every action has consequences - as long as you are willing to accept the possible consequences, then what's stopping your action? 

What people seem to want is not a "free market", but an "equitable market", where everyone has a good outcome. That's impossible. It cannot be done. As long as people vary in their abilities, there will be some people who are 3 or 4 standard deviations better at dealing with current market conditions than anyone else is. As those people apply their skills, they will inevitably create a monopoly in their industry simply because they are so much better at that industry than anyone else is. 

When the monopoly exists, players who are not as good at playing be current rules will try to change the rules, and they will use as their justification the idea that "the market is not free." If they successfully change the rules - shock! - the new rules favor their style of play instead of that of the old market leader. Then they become the monopolists and a new set of players try to change the rules to benefit themselves at the cost of the current leader. 

And that's the point. EVERY market is a free market. The USSR, Communist China, the US, corporate monopoly, oligarchy, mob rule, war, peace, chaos, quiet, pick-your-favorite environment, whoever is currently on top in that environment got there because they figured out how to turn the existing system to their advantage. Anyone is free to figure that out - it's just harder for some groups in some circumstances  to figure that out than it is for those same groups in other circumstances. Some circumstances favor one set of skills, some circumstances favor another set of skills. We go 'round and 'round in our perpetually, universally free market as everyone tries to game the rule set to their own advantage. 

But the economy is absolutely man-made, completely free, and all the actors in it can take whatever risks they want to amass whatever advantages they can. To say that one rule set is "free" while another rule set is "unfree" is simply to say that you personally find the first rule set advantageous while you don't find the second set advantageous. In that sense, "free market" is a phrase that has no meaning.

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