In relentless pursuit of freedom.
The throes of death do bear contempt,
From the breast of ev’ry man,
Nearly doth he taste,
Else he understand.
When seen but from fair distance
The blackness drowns all light,
Or rather blackness nay it was,
When seen with eyes aright.
Yet in his breast man needs a cower,
From eyes so far and cold,
Lest digest he the second fruit,
These mysteries unfold.
Still very this hour
Doth terry not ever,
Whence all tales be told;
Cold becomes bright forever.
An article from last month’s edition of The Freeman in which I discuss some economic lessons from fantasy football and at the same time grind an ax with a former fantasy football commissioner. Maybe it’s wrong to use economic principles and a great outlet like The Freeman as a way to vent frustration, but it worked and I am now over it…mostly.
The word mentoring sounds really nice. It gives everyone a good feeling. It’s like “charity”, “generosity”, “helping”, or “teaching”; they all evoke positive emotions and make you feel like it’s something you should do. I think all of these words are overused, over-appreciated and under-scrutinized. There’s a valuable way to engage in all of these things, but the common forms they take are pretty flimsy.
Take mentoring. Those seeking to mentor often see potential mentees as projects or people upon whom they must bestow wisdom and guidance. Those seeking to be mentored are often looking for answers to tough questions in life like what education or career path to pursue and what steps get them closer to their goals. Neither of these approaches yield much fruit. Why not? Because no one has better answers for the questions you face than you. No one knows more about your own life and the direction it should take than you.
I’ve had older guys that I really respected (and some that I didn’t) attempt to take me under their wing and help guide my life. Sometimes I’d see something interesting in a person and seek them out to learn from them or ask them about it. So far so good. But at some point it would evolve into them feeling like they needed to provide not just conversation about whatever I was seeking, but guidance for my life as a whole. I balked at this. At the time I always felt a little guilty, like I shouldn’t be so arrogant to ignore or turn away from their attempted mentoring. I didn’t have a father figure in the traditional sense, and a lot of these guys recognized that and were trying to help fill that void. All good intentions. Looking back, I am thankful for that anti-mentee instinct I had. I never wanted or needed guidance on life in general and no one could have given it anyway. I wanted to learn from them and discuss with them specific areas in their thinking and action that I admired or found intriguing.
On the flip side, I’ve been guilty of the same. I’ve spotted talented young people and tried to help guide their lives. It doesn’t work.
I recall a revelation I had that freed me from the guilt I felt for ignoring mentors. I realized that I knew more than they did. Not about everything, of course, but about my own life. I realized that they couldn’t answer questions for me, but they could live their own life in a way that captured my attention and led me to seek specific bits of wisdom. I had to be the seeker to gain value. If they were seeking me to offer advice, chances are it wasn’t all that valuable. There are exceptions, but as a general rule I found the most helpful wisdom was that which I sought myself and not that freely bestowed by well-intentioned mentors.
This realization did not cause me to respect my elders less, but more. I released them from the burden I had imposed on them to provide solutions and answers they couldn’t and allowed them to just be who they where. It was then that I began to realize the things I did respect in them and the things I could learn.
I have endeavored to be a mentor only when sought, and even then not to attempt to offer answers for questions never asked or big-picture life questions I couldn’t provide the answers to. If someone seeks me out to ask my thoughts on a piece of writing, a career move, or an educational choice, I gladly share them. I’ve tried to resist the temptation to go on to tell them much more. If I have anything valuable to offer, it is more likely to come from their observation of me than from my words. If they want more, they can seek more.
Mentoring is great, but you should always remember that no mentor has the answers to your questions. They have answers to their own questions, and those can provide helpful insight. Seek such insight from those you respect, integrate it into your worldview, but remember that at the end of the day, you are your best mentor. After all, it’s you who lives with the choices you make, not others. Incentives are powerful.
Since our move to South Carolina I’ve had a renewed interest in American history and, in particular, the history of the South and the institution of slavery. I’m a Yankee invader, so my notions of the South were pretty simplistic. I saw monuments and read snippets that were incongruent with the narrative I grew up with regarding the Civil War, slavery, and the South in general. It became clear how uncomfortably complex the whole mess was.
A friend recommended Roll, Jordan, Roll by Eugene Genovese. What an excellent book! The author filters some things through a lens of Marxian class theory, which is not really my thing, but the book is jam-packed with counter-intuitive insight and uses tons primary sources in a very enlightening way, not just a bombardment of long quotations or endless footnotes which historians sometimes do. The book is a great reminder of how much more complex the world is than we try to make it in retrospect. American slavery was not a simple story of good people and evil people. It was not a simple case of economic exploitation. It was an elaborate and highly nuanced institution with unlikely defenders and enemies. It was an evil institution, but the people within it were not necessarily evil or good.
I’ve written elsewhere about the fact that institutions can be good or evil even if the people within those institutions are not. I think it’s important to remember this. It doesn’t let us off the hook with sweeping declarations of good and evil. It forces us to look at the world as it is, and understand that people respond to incentives, and that good people can support bad institutions because of false beliefs. It doesn’t mean they aren’t accountable for their beliefs, but they mightn’t be knowingly engaging in evil.
Genovese’s book revealed that some slave owners abhorred the institution. Why didn’t they simply free their slaves? Sometimes state law prohibited or made very difficult the freeing of slaves. Some owners believed that, once freed, the slaves would risk re-enslavement by others, a much crueler life in the free but still racist North, or great hardship in a world for which they were not equipped. Whether this was true, there was some reason for slave owners to have such fears. Some freed slaves did suffer these fates. One doesn’t have to hate slavery any less or agree with the logic of these conflicted slave owners to allow the possibility that they needn’t have been pure evil. One former slave owner wrote how wrong he had been to assume that the slaves needed him and that he needed the slaves. He described how poorly most plantations were doing financially, and how the end of slavery actually improved them economically. He talked about how well the former slaves got on away from the plantation. Both of these outcomes surprised him. His worldview was so entrenched that he failed to see how the institution was harming not only the slaves but his own economic well-being.
The more difficult fact is how many slaves claimed to not want freedom, and how many chose not to take it when given the chance. One could make the material case that some slaves might have had better lives on a plantation than the other options available at the time, and that is certainly worth considering, but it strikes me that there’s something deeper at play here. There is a belief in one’s own helplessness and a fear of the unknown common to all people who have long been oppressed. When the Soviet Union fell there were stories of people who did not know what to do and longed for the security of the previous tyranny. Abused spouses sometimes exhibit similar behavior. Fear of the unknown dangers of freedom does not make the captives bad people in any of these cases. It reveals the complex nature of such institutions and reminds us that long-run oppression of such magnitude requires far more than physical force: it requires some level of belief on the part of oppressors, oppressed, and third parties that the institution is either moral, necessary, or at least inevitable.
We do ourselves a disservice if we boil everything down to good vs. evil and explain every tyranny as the result of raw physical power. People are complicated creatures who seek the most gain at the least expense and who accept or contrive all manner of beliefs to justify their choices. Or maybe the beliefs come first and determine the choices. Either way, in the long run ideas shape the institutions we live under. History and our own times are better understood when we treat people like rational actors whose choices are shaped by their beliefs rather than evil egomaniacs or saintly altruists.
There is a lot to learn from the experience of American slavery. It was a unique institution, but not so unique that it doesn’t have modern lessons and parallels. Many people failed to see beyond slavery. What evils do we fail to see beyond or imagine the world without? Robert Higgs provides some provocative food for thought here.
I’m not a fan of the state. It’s arbitrary and highly inefficient. Still, it’s here for the time being and I try to make my peace with it even while I try to change it. For the most part I succeed in being happy despite the state harassment we all encounter. Trips to the DMV, pat-downs by TSA agents and interactions with traffic cops can get me irritated, but I’m generally optimistic and calm. So why did the relatively small increase in payroll tax get me so steamed?
To be honest I’m not entirely sure. For some reason I was really struggling to not feel anger and helplessness after recalculating our family budget post tax hike. It was not the additional amount of money being taken that evoked such deep frustration, but the total inescapability of it. It reminded me of the feeling I had when I had my bike stolen as a kid. I came out of the store and it was just gone. I felt violated and insecure. But now it wasn’t a random thief who strikes once and leaves you alone; it was the state, always there and ready to demand more when the mood strikes.
If your cable bill goes up, you have options. You can call and vent your frustration. You can tell them the increase was not in your contract, or in the very least not clear to you. This often results in a renegotiation. My wife has a knack for getting utility providers to reduce their rates or offer temporary discounts if ever they make an error. As a last resort you can always cancel the service entirely and go with a competitor or simply go without. The state leaves no such option.
Being completely captive to this supposed service provider is disempowering. I was recently reading a book about depression and optimism in children and one of the things that stuck out to me was how powerful early experiences of helplessness can be. When kids are not able to experience cause and effect; when they can’t take action to alter the outcome of their world, they begin to despair. The despair often manifests as depression, bullying and withdraw. Punishment and reward with no connection to the child’s actions plant seeds that can take a lifetime to uproot.
The realization of just how vast and impersonal the state is can have a similar effect. One day you must pay the state X, the next day the rate is Y. There is nothing you’ve done or chosen to make this happen. There is nothing you can do.
My wife asked me what the least oppressive tax environment in the world was. At first I tried to recall some of the lists and charts I’ve seen, but then I remembered that it wouldn’t matter. We were both born in this country. That means even if we moved to another country, the IRS would demand income taxes from us for the rest of our lives. The only option is to officially expatriate, in which case the state calculates your lifetime tax liability and asks you to pay it in one lump sum. Some “social contract” this turns out to be!
I’ve been to countries with a high level of government “corruption” – an abbreviated way of saying a state that does what all states do, but without the factory-like repetition and paperwork. It’s not uncommon in such places to have a state agent approach you and claim you are in violation of some or another rule. You pay them $20 or so and they’re on their way. The rules are used as a threat to get your money. You pay, you can ignore the rules. Here in America it works a little differently. Instead of one agent showing up at your door, there are fifteen hundred bagillion nestled in cubicles wrapped in drab Soviet prison style architecture. They send you a lot of papers demanding that you get in your car and drive to them. You fill out six forms and wait in line for three hours. Then they tell you one of the forms is out of date and send you away because the new form is only available tomorrow. On your third visit you complete the forms properly so you can move on to the next step, paying whatever amount they determine you must pay. You pay them. But unlike countries with corrupt governments, your payment here does not buy you freedom from the silly rules. You pay in order that you may obey them.
Of course there is no doubt this kind of system is more predictable than the corrupt states. Then again, prison is predictable too. Predictability is something, but it’s not everything.
Back to my tax bill. I was angry. I knew it was unhealthy and counter-productive. I indulged in it for a little while and then decided it was time to be free, state or no state. I went and re-read this inspiring interview with my good friend T.K. Coleman. It got me back on track. T.K., The Shawshank Redemption and the late Harry Browne’s book How I Found Freedom in an Unfree World are excellent go-to’s when I start to let the oppressors win. If I’m free, “what can man do to me”?
A few good friends and I teamed up with the Mackinac Center and put together a colloquium for undergraduates. It gets its name from Thomas Clarkson, a young man who played a major role in ending the British slave trade. More on Clarkson here.
The reading list is intended to have an arc to it. We examine what the state is in theory, what the state is in practice, whether the state works well compared to non-state alternatives, whether states can be improved or constrained, whether statelessness is an option, and finally how to get from the current to a better (or no) state. There are too many excellent books and essays for each of these questions, but I’m pretty excited about the sampling we put together.
I majored in political science as an undergraduate, and I can tell you we were never asked to consider fundamental questions like these. Nearly all of my courses and readings assumed an idealized state or talked about what a noble or just state should be like. Public Choice theory was never mentioned, nor did we engage in serious examination of competing views of the origin and nature of states (just Plato and Hobbes) and how they actually operate. After a few courses touching on such theories, the rest was mostly squabbling over quantitative methods for gauging public opinion and whether single member districts were more “efficient” than proportional representation, whatever that means. It was always assumed that democracy was wonderful in and of itself and achieving and maintaining it the goal of all political action. I don’t think you’d find such religious devotion to an ideal in divinity school.
Maybe I’m trying to relive my undergraduate days vicariously through the participants, but I hope it will be valuable for them as well. Here’s the reading list we compiled.
I am an obsessive finisher. Loose ends and unfinished projects drive me nuts. Things in progress do not excite me, they stress me out. I’m always looking to cross things off, get them out of my mind and move on to the next thing. I think this is a major asset, but it has come to be a liability as well. The more complex and long-term what I do becomes, the more I’m fighting against my own habits and instincts.
When I complete a phase of a project and pass it on to someone I’m collaborating with, within days I’m impatient and contemplating just finishing it myself even if it’s imperfect. I want to close the case. This results in a lot of complex, messy projects either being dealt with in too much haste, or potential projects never launched, because it is not clear how they would be completed.
I’m trying to learn to love the process and be comfortable waiting. I’ll probably never be one of those people who has 10 books going, 25 internet tabs open at once and 50 emails they’ve read and not responded to. I’m trying to get more comfortable with the idea though. Most of the time, people with many things live at once are in that position because they are not very good at deciding how much time each project really warrants and when things aren’t worth any time at all. I’m good at that and I wouldn’t trade it. Realizing how much information is best completely ignored and how many emails should be deleted is powerful. But in my haste to purge low value tasks and complete valuable tasks, I often miss out on the richness that can come out of a slow-growing idea or a longer collaborative project.
I want to wrap this post up nicely, but maybe I’ll just leave it here…
An article I co-authored with Chris Nelson, published in the Libertarian Alliance’s Tactical Notes series. It’s an honor to be published in this series. Several great thinkers have discussed tactics for advancing liberty via this publication, including Murray Rothbard. Chris and I argue that, whether or not you believe in anarchism, it is an idea that demands serious discussion and thought if liberty is to be advanced.
I got to thinking about Truth in art after a conversation about The Dark Knight Rises, whether it means anything, and if so what. Is it silly to look for deep meaning in the stories we love?
I have long suspected that artists are not as deep as we like to think they are. At the same time, I think the art they produce is often deeper than we give it credit for. This seeming paradox is resolved when you accept that fact that Truth can be conveyed through art without the express intention of the artist.
Truth is bigger than words. Words are sounds and symbols that have evolved from social interaction as a way for humans to communicate ideas to each other. But ideas can be communicated without words and words can be supplemented by other media to better convey ideas. Words are perhaps less able to communicate some more abstract and foundational ideas than other methods of conveyance.
Story is one of the oldest forms of communication. Stories frequently use words, but they are more than the words. Stories are also communicated through painting, plays, dances, music, movies or any artistic medium you can imagine. The great stories all convey Truth; that is what makes them great.
They convey to us Truth about ourselves, about the human condition, about reality and morality. Some of the Truest stories are not factually true at all. The fable of the boy who cried wolf may be historically inaccurate, but who would argue that its factual truth has any bearing on the Truth it contains?
The Matrix is True. It communicates Truth about the human condition, whether or not its creators intended it to. I have heard the Matrix compared to an abusive relationship, a political party, religion, the state, public schools, and many other institutions. All of these are True. The story in The Matrix conveys a truth that is more fundamental than any of these specific institutions and, as such, it can be applied to all of them. The more True an idea, the easier it is to apply it to multiple arenas and analogize it.
The fact that the Truth in The Matrix can be applied broadly does not mean it is merely a relative Truth. It is a timeless Truth with innumerable manifestations. Let us, for sake of example, agree to the Truth that honesty is better than deceit. It is entirely valid to say this Truth condemns a lying politician. It is equally valid to say it condemns a lying businessman, or priest, or those who lie to themselves. These diverse applications of the idea do not make it relative; they merely extend the basic Truth in different directions. If it were merely relative, we could not say that honesty is better than deceit at all.
The artist may or may not intend to convey Truth, but great art conveys it nonetheless. The artist may be grasping at some sense of the epic in her story, and when the narrative comes together it is precisely because it contains some powerful Truth that it satisfies the artist and draws the audience in and leaves a lasting impression. While there are certainly works of art that seem to contain little if any Truth, the greatest stories are True stories. Some genres lend themselves to Truth more than others, but it may be found in any of them.
J.R.R. Tolkien is said to have claimed that his Lord of The Rings trilogy had no political or philosophical axe to grind. I do not doubt his sincerity. The stories may not be intended to convey any particular truths about this or that political system or worldview, but they convey Truth nonetheless; that truth may be too basic to put into words, or too abstract to be tied to an ideology.
There is a reason we are stirred to tears or goose bumps at daring escapes, last-second rescue, triumph against all odds and heroic self-sacrifice. The great stories include common elements that reveal Truths of the human condition, and when we encounter these truths it works in us on a level deeper than what we can easily verbalize.
Time seems to be the best instrument to tease out the most poignant Truths of a great story. In its own historical context, a story may be interpreted as a more direct statement on events and ideas of the day. While this may or may not be the artists intent, over time the core Truth of the story emerge. If we return to the famous fable of the boy who cried wolf, it is not hard to imagine such a story being interpreted in numerous ways by a contemporary audience. Perhaps it could be seen as a critique of young boys as shepherds, due to their immaturity. It might be viewed as a commentary on one person in the village, or perhaps a satire of an actual event. These may all be valid in their time, but they are smaller than the Truth in the story. With time, the basic Truth has emerged as the story has been a reference point in both casual conversation and academic discourse; trust is valuable and ought to be preserved.
When I put into words the Truth in this story, it instantly limits and reduces it to less than its full power. The Truth in the story is bigger than how I have described it, because the Truth in any great story is bigger than the particular characters and features within it, or the words used to describe them. Nonetheless, you see how time winnows away the more temporary truths in a story so the timeless Truth can emerge.
It is an entirely reasonable and valuable exercise to look for the Truth in art and draw analogies to life experiences. This does not mean it is always effective. The Matrix may contain broadly applicable Truth, but it doesn’t mean that everyone will see the same value you do in comparing it to, say, the American Bicycle Polo Association. The barrage of commentary on art that seeks to draw from every new movie or book a parallel to the latest election is tiring and leaves the casual art consumer yelling, “It’s just entertainment, leave it alone!” Perhaps we would do well to shut up and let the art sink in for a while before determining if it conveys any Truth at all, and if so in what ways it might be usefully employed.
Still, the Truth of great art is incredibly valuable to our individual search for fulfillment and self-discovery as well as our ability to share ideas with each other. Nearly everyone has seen The Matrix by now, and this fact provides a common foundation for an abstract Truth which is difficult to convey with words. This foundation allows us to build out new ideas without verbally constructing the basic blocks. I have used Matrix references in conversation with great success, just like so many of us use references to the boy who cried wolf. A world of Truth is conveyed with reference to a story.
When art conveys Truth it plants a seed in all of those who consume it. This seed can be watered and cultivated to grow into multiple manifestations of the basic Truth, but the seed itself provides the core idea and the DNA for applications to our lives.
For this reason, it is entirely defensible to assume that artists do not intend to convey any great Truth, but if they produce great art, Truth will be in it. It is not contradictory for the same work of art to be described as conveying two different truths, stemming from the same Truth. It is not worthless to extract meaning in and make analogy from stories, even if the creator does not find the same meaning. Art is one of the most valuable tools in the search for and sharing of Truth, and it should not take a back seat to less entertaining mechanisms.
So yeah, go ahead and make those analogies between The Dark Knight Rises and whatever worldview you feel it applies to. But be on the lookout for a more subtle Truth in the story that may remain when the ideologies of the moment fade away. Or if that’s not your cup o’ tea, just have fun watching the movie. If it’s a great story, some Truth will find its way to you either way.
It is a common belief that capitalism “delivers the goods” and creates prosperity, but does so only at the cost of our souls, our dignity and our humanity. Many people doubt capitalism not because they fail to see its wealth-generating capacity, but because they believe it to be immoral. I wish to contest the idea that capitalism is immoral and present evidence to the contrary. Not only do I believe capitalism passes the minimum test by failing to violate basic moral standards; I believe it actively promotes a robust sense of morality in a way far superior to any other system.
Before I present my arguments, I would like to define what I mean by the word “capitalism.” I mean only a system where individuals are free to keep, trade, use or give away property that was peacefully acquired. This is merely a negation of the use of force in the use and exchange of goods. I do not mean a system that is pro-capitalist, or pro-business or pro anything but freedom for the individual.
In matter of fact, capitalists and established businesspeople have always been the most active enemies of capitalism. That is because capitalism is decidedly not pro-business. It allows for human creativity, competition and ceaseless challenges to vested interests as people continually innovate in order to better serve customers. It is a system that does not allow one to rest on their laurels long, and as such, those who have been successful frequently try to slow capitalism down and look to the state to find shelter from its dynamism.
If the word capitalism is distracting, I encourage you to substitute “free trade,” “free markets,” “voluntary exchange” or simply “freedom.” It will not change the meaning of my arguments in the least. I have chosen to use the term capitalism because it creates a more provocative title and because the term has been embraced by many intelligent classical liberals. There are good arguments both for and against the use of the term capitalism by advocates of free markets, but I wish to avoid this debate at present.
The titles of the next seven sections in this essay provide a clue as to where I am going:
Through these sections I will attempt to briefly explain why a system of free enterprise is the best possible way to promote these virtues.
I don’t think we should merely accept or “put up with” capitalism, but we ought to embrace it as the key to unlocking human potential—moral, mental, spiritual and physical. There is much more to be said on the morality of capitalism than I will say in this essay, and I mean only to present some of the most basic arguments. Below is the complete essay with seven arguments for the morality of capitalism.
It’s a lot of material, so you may want to bookmark it and come back to each section when you have time.
Capitalism is honest because it accepts reality as it is.
Economist Thomas Sowell describes two ways of looking at the world, or two visions: constrained and unconstrained. Sowell’s book, A Conflict of Visions, is an application of many themes in the work of economist F.A. Hayek; especially Hayek’s views on the dispersed nature of information, the limits to what humans can know about each other, and the problems with attempts to replace organic and decentralized markets with top-down rational planning.
A constrained vision of the world recognizes some things as more or less unchangeable—scarcity and elements of human nature like the desire to better oneself and even frequent greed and nastiness. The best bet is to deal with these realities as best we can, rather than to wish them away. An unconstrained vision sees these as problems to be solved. Humans and our social systems are perfectible, if only we plan and direct our activities in a more rational way.
Regardless of the merits of each respective vision, it is to the great benefit of us all that a capitalist economic system is based on a more or less constrained vision. Even if it is possible that someday people may be better or scarcity may be gone, it’s here, and capitalism doesn’t need it to go away in order to work.
Greed and self-interest are different. Self-interest is unavoidable. All people are self-interested, even when acting altruistically, because they believe the action will get them closer to where they want to be than inaction. Greed is unknowable to anyone but the greedy person. As Milton Friedman reminded Phil Donahue, greed can’t be prohibited by any system. Capitalism realizes this, and rather than wishing greed away, it provides an incentive structure that channels self-interest, whether greedy or not, to produce the least harm and the most good.
This is the fundamental insight of Adam Smith, that the butcher doesn’t provide meat out of love for his customers, but out of regard for his own self-interest. It’s not good if the butcher is greedy, but even if he is, good can result if he’s in a capitalist system. Capitalism is not harmed if he is a selfless person, nor is it harmed if he’s greedy. In fact, if he is a greedy jerk, it is likely to hurt his business because customers may not like buying from him. Bigots, jerks, scoundrels and greedy people won’t ruin capitalism, but capitalism might ruin them.
Contrast this to government, where officials and bureaucrats are supposed to do not what is good for them, but what is good for society. For government programs to achieve their goals, it would require people—voters, politicians, employees—to be always selfless. Voters don’t bear the cost of casting selfish votes; politicians can spread the costs of pork across millions of taxpayers and concentrate the benefits to a few; and the workers at the DMV or TSA don’t fear losing your business if they treat you poorly. Governmental solutions are not honest about human greed, and they cannot channel it to create benefits for all like the market can.
Capitalism also recognizes scarcity and is honest about it. Love to save trees? Love to save children?
Say there is a forest that is highly valued by the environmental community. It is also the site on which some philanthropist wants to construct a children’s hospital. What’s more important? In government-run or managed economies, this becomes a bitter political question, and everyone is forced into the unenviable position of deciding whether they care more for trees and animals or sick children. In a market system, the property owner can accept offers for the land and a price will emerge. Those who truly value it most will place a higher bid and proceed with their plans for the forest.
To many people, this seems cold and calculating. It feels as though markets reduce children and trees to dollars and cents. In reality, it is an honest way to deal with scarcity, and it allows for the most valuable actions, as judged by the people involved, to be completed. What is the alternative? A system of price caps, regulations or government decisions about land use will not result in the best use of the land, but the one that is most beneficial to political interests. It prohibits caring people who might be willing to sacrifice great amounts of their own resources from doing so, in order to please other people who may only mildly care and aren’t willing to put any of their own resources behind their desires. “Price gouging” is another excellent example of the good that results from capitalism’s ability to deal honestly with scarcity.
Capitalism is not merely a system that honestly recognizes and deals with scarcity and greed, it also encourages and breeds trust among individuals. When I go to the store to buy fish, I don’t really consider the possibility that the store may sell me rotten or poisoned fish. No conscious process takes place in which I analyze the incentives facing the store owners and employees and asses my probability of risk. And these are people I’ve never met, people who don’t care about me, and people who I may dislike if I did meet them. Yet the very anonymity and impersonal nature of markets require a tremendous amount of trust from all parties. And we do trust each other! I needn’t trust anyone’s motives or knowledge personally, but the market itself has proven to be so trustworthy that I don’t feel any suspicion.
Capitalist economies produce trusting people. Contrast that to dictatorships or heavily planned economies. If you’ve ever spent time in a country with a heavily controlled economy, you’ve probably experienced things like vendors holding your money up to the light to check if it’s fraudulent.
Dreams of a world without scarcity or greed are wonderful. But an economic system that is honest about the scarce nature of resources and people of less-than-stellar character, is an unheralded blessing for humanity. It helps us make better choices with what we have, it channels the otherwise destructive behavior of others for our good, and it makes us more trusting people which creates a more vibrant civil society.
Free markets are probably the greatest force for peace in history. There are three distinct ways in which capitalism promotes peace.
The simplest way in which capitalism is peaceful is by its abstention from direct acts of violence. Free markets offer no positive prescription for what market participants must do. A genuine capitalist system is one of free trade and voluntary association. People are free to do, in the words of Leonard Read, “Anything that’s peaceful.” There are no “do’s,” and the only real “don’t” at bottom is, “don’t use force.” All else is permitted, but there is no guarantee the market will sustain or reward it.
Capitalism is not a master plan or a system created ahead of time by planners. It is really just the result of peaceful interactions. It is what emerges if force is only used in defense against force. The absence of violence results in secure property rights, contracts and all of the other institutional trappings that are commonly associated with capitalism.
Every other economic system requires a direct application of violence. Any regulation, fee, tax, trade barrier, licensing regime or mandate offered in any kind of “mixed” or corporatist or socialist or fascist regime is backed by the threat of violence.
Beyond the absence of force in individual actions, capitalism promotes a much broader peace between people groups from different regions and of different cultures and backgrounds. Self-interest begets trade; trade begets specialization; specialization begets cooperation.
Ricardo’s law of association demonstrates how much more productive we are when we specialize and trade, which means that over time we come to rely on a vast network of trading partners for our own well-being. Some people find this state of affairs troubling and you hear things like, “What if X country decides to withhold good Y from us? We rely too heavily on imports!” There are plenty of natural and man-made things to fear in the world if you wish to worry, but the cutting off of trade in a truly free market ought not to be one of them. If a person genuinely wants to avoid all reliance on other people (not sure how this would work for a newborn), they are free to live as long as they can only eat what they can find or grow on their own. It’s not hard to see that that kind of “independence” is far more risky than being part of an interdependent trade network.
The more people rely on trade with others, the greater the cost to all parties of a conflict. If I grow apples and trade them to you for chickens, the last thing I want to do is tick you off and lose my chicken supply and vice versa. On the flip side, if you have a lot of chickens and I have none, and there is no trade between us, I will be tempted to try stealing some. Lack of trade builds enmity. There is a famous saying, attributed to Frederic Bastiat,
“If goods don’t cross borders, armies will.”
In a free market, the cost of belligerence is very high. When governments come in and restrict trade or subsidize violence by building up large militaries, the cost of belligerence is lowered, and the benefits of peace are reduced. It is the state, not trade, which creates conflict.
Pretend you live in a free-market economy. You are friends with your neighbor, who works at a small grocer in town. You find the selection to be limited and the prices high. A new supermarket chain is coming in to town, and you’re excited about it because the lower prices and better selection mean you’ll have better meals and money left over for leisure activities with your family. Your neighbor is unhappy about the new store because it may cost him his job. The store comes in. You shop there and save while also expressing your heartfelt empathy to your neighbor whose store may soon shut down. You maintain your friendship, even though in the economic sphere you cease to be trading partners.
Now pretend you live in a heavily regulated economic system much like ours today. You and your neighbor the grocer are still friends. This time the chain store is not free to sell in your town without a government permission slip. It goes up for a vote. Your neighbor actively campaigns to restrain the store from opening up, which will prevent you from buying better products for less money. He urges you to join his efforts and put a “No chain stores!” sign in your yard. You tell him that you won’t because you wouldn’t mind the chain store. It turns in to a bitter, possibly friendship-ending disagreement.
Politics makes enemies out of friends. In a market, you are free to express your varied preferences with your own actions and the expenditure of your own resources. If someone sells something you don’t like, you don’t have to buy. But the very anonymity and absence of compulsion in markets allows you to form community bonds quite separate from your trading choices. You can maintain friendships with all kinds of people whose goods and services you do not necessarily value. You can befriend an orchestral violinist without being a patron of the symphony. But when resources are allocated politically rather than in a free market, that friendship is hard to maintain when you would vote against a tax to fund the symphony hall, which she supports.
Capitalism allows our diverse tastes to be explored and expressed in a way that doesn’t restrict choices to zero-sum contests of your preferences over others. A cornucopia of choice exists in the market, and this not only means better products, but also the removal of artificially created conflict between choices A and B, such as those that inevitably spring from government management.
Capitalism relies on voluntarism rather than violence in individual interactions. It also creates cooperative networks that dramatically increase the incentive to get along and raise the cost of conflict, while government intervention does just the opposite. Finally, capitalism allows us to live in harmony despite our different tastes and sometimes conflicting demands for limited resources, while political allocation always forces us to take sides and go to battle against each other. If you want a more peaceful world, promote capitalism.
In the previous section I talked about the honesty of capitalism; people are not angels. A capitalist economy recognizes this fact, and our greed doesn’t ruin the system. Closely related to the honesty about people’s motives is capitalism’s humility about people’s limits. Humans are not all-knowing, and if force is absent, a free-market is what emerges to deal with this fact and spread valuable and coordinating information the best way possible. Markets are a result of our lack of individual knowledge, and a constant reminder of how fallible we are.
It has been well documented, especially during the Socialist Calculation Debate that absent a free-market, there is no way to allocate resources effectively. If we believe that people (or at least some group of elite experts) have near perfect knowledge of what resources and finished goods are valued to what extent by whom at what time in what location, then certainly a centrally planned economy would be superior to the messy market with all its profit and loss. Every time an entrepreneur starts a new venture that ends up failing, resources are wasted. His incorrect knowledge about how much people would value his products cause losses. A ruthlessly efficient economy wouldn’t suffer any such waste.
Indeed, the classical (and still standard in most economics textbooks) model of the ideal economy is one in which “perfect competition” is reached. The condition exists when everyone has perfect knowledge of the availability and cost of all resources and the value to consumers of all goods. There is no profit, no loss, no shortages, no surpluses and no speculation in this idealized economy. Everything is in equilibrium.
Seduced by this economic model, many an economist, statesman, do-gooder, social-reformer and power-hungry despot has attempted to achieve it in practice, and with disastrous results as evidenced in places like the former Soviet Union. The model may be a useful tool for testing some economic theories, but only an ill-informed or incredibly arrogant person would see it as a desirable or possible end-state for the real world economy. No one has perfect knowledge. It is impossible to even imagine a world in which they could. Since economic value is subjective and changing all the time, how can anyone know how much another person will value one good compared to another at any given time, let alone millions of people in a constantly changing world?
Capitalism is humble enough to realize our limited knowledge. It relies on the price system—a spontaneous, organic result of billions of free choices—to convey information. It relies on consumers, producers, entrepreneurs and capitalists to act on that information. When they get it right, value is created, and it generates new price signals that encourage more of the same. When they get it wrong, loss results and puts a quick end to the waste of resources and sends a signal telling others not to do the same.
The price system conveys so much information in such a small bundle that I can scarce think of an analogy to show just how valuable it is. It is the most sophisticated communication system the world has ever known. Leonard Read’s famous, “I, Pencil” details the way in which the price system coordinates the actions of thousands of individuals who don’t know each other and might not even speak the same language, to bring an item as simple as a pencil to the market.
Beyond merely helping us know the preferences of others, the market system can actually help us discover our own assets and abilities. A professor once told me of a Canadian man who played the bagpipes and made small metal replacement parts for other bagpipe enthusiasts as a hobby. One day he saw an ad in the classifieds for someone who could make small metal parts for an airplane manufacturer. He could use some extra cash, and it sounded similar to his handcrafted bagpipe fittings so he gave it a shot. He ended up making good money producing airplane components—an industry he knew nothing about and never fancied himself skilled enough to enter.
If a central planner was trying to make the best use of all the labor and resources in Canada, he might conduct a survey of the skills possessed by the people there. This man could not have made known his skill in airplane manufacture, because he didn’t even know he had it! The discovery process of the market revealed to him knowledge about a value he could create for others that was previously hidden. If we don’t even know our own economic value, how can we know the values of others?
We can’t produce what the capitalist system produces. It is greater than the sum of its parts. It conveys coordinating information that lets us each go about our business and produce end results that are beyond our own abilities and comprehension.
Capitalism’s features—the price system, failure and success, profit and loss, trade, specialization, even the hated speculator, middle man and advertiser—are the result of and cure for our ignorance. We need them to help us choose actions that are valuable to ourselves and others.
A capitalism system does not require perfect knowledge. Through it, we can produce what no planner ever could. This humble, dynamic, trial-and-error approach produces wealth and innovation like no other system. It also keeps us humble on an individual level. When you contemplate the production of a simple pencil, and how far beyond your own skill level it is, it certainly puts things in perspective. It reveals how much we need our fellow man, and how much more we can accomplish when we allow this organic market process to coordinate our activities.
“All things are subject to the law of cause and effect.”
The opening sentence in Carl Menger’s 1871 Principles of Economics seems at first glance little more than a truism, but it is an idea so foundational and so often ignored that it deserves great attention. It applies not only to economic activities, but to all human endeavors. If we seek to live moral lives and promote what is morally good, we ought to heed these words.
What often passes for praiseworthy is any action, or cause, whatsoever that is taken with a sincere desire to achieve a noble effect. The relationship between cause and effect is wholly ignored. But is it moral to take uninformed action that has no causal relationship to the ends sought?
If I told you that one sick child would get well for every window you smashed, would you be a person of high moral character if you spent the night naively smashing windows with a sincere belief you were doing good? While your heart may be pure as the driven snow, doing good requires at least a genuine effort to understand the world and the likely effects of your actions. As C.S. Lewis said of moral busybodies,
“They may be more likely to go to Heaven yet at the same time likelier to make a Hell of earth.”
None of us has perfect knowledge, but to the extent that we are able, we are responsible for using sound judgment. In the age of the Internet it would be hard to claim you didn’t know better for taking actions that hinder rather than help the target of your good deeds. A valiant self-education effort is possible in almost every field. To whom much is given, much is required.
Once we accept the fact that genuine moral good requires more than intentions, it becomes immediately apparent that capitalism has a leg up on every other economic system when it comes to the noble goals of poverty alleviation, peace and health.
The desire to help the poor is nearly universal. But when it comes to actual efforts to do so, there is a spectrum of outcomes ranging from absolute oppression to life-changing relief. We need to consider the outcome before we advocate a course of action. Capitalism is the most powerful force for the material betterment of humanity in the world. State interventions like minimum wages, price caps, foreign aid, immigration restrictions, and professional licensing and regulations do unspeakable harm to those of limited means.
Economic theory predicts better outcomes from markets than governments. Observation backs the prediction. The evidence is abundantly clear that economic freedom does more than government interventions (and private charity) for improving living conditions by every measure.
Many people base their arguments for economic freedom entirely on the fact that it produces better material outcomes. But don’t let that fool you into thinking capitalism “delivers the goods” and ignores morality. I’ve addressed just a few of the ways in which capitalism promotes moral values in previous sections, but let’s not overlook the moral component of an improved quality of life for the least of these. If helping the poor is good, and if good intentions must be coupled with results, a free economy is in excellent moral standing.
In addition to achieving the ends of poverty reduction, capitalism also promotes responsibility in individuals. Since it is a negative system in which we can’t force people to do what we want, we must learn patience and peaceful persuasion. We have to be ready to accept the consequences of our decisions and learn to act prudently. Freedom allows us to become responsible.
Poet and theologian John Milton famously argued for free speech by saying that without it, the ability to become a morally responsible individual would cease. Milton said that without the freedom to choose wrongly what books to read or doctrines to believe, there would be no concept of choosing rightly. People would not become moral, but would be of a weaker character and less able to resist evil when they encountered it. There is no righteousness in not making bad choices that are not available to you. A truly free market leaves open the possibility of bad decisions, but any system that does not allow these decisions makes us less, not more, morally responsible.
Capitalism gets saddled with a lot of baggage that doesn’t properly belong to it. Some of this is the result of ignorance of basic economics, some of it a poor reading of history, but most of it is due to a bad definition of capitalism. In the first section, I defined what I mean by the term:
[A] system where individuals are free to keep, trade, use, or give away property that was peacefully acquired. This is merely a negation of the use of force in the use and exchange of goods. I do not mean a system that is pro-capitalist, or pro-business, or pro anything but freedom for the individual.
This definition does away with many of the accusations made against capitalism. They may be true of our current system, but not of a genuinely free market. Still, there are a number of claims about capitalism that remain, and I wish to clear up at least a few of the common errors.
Capitalism is not a zero-sum game. For someone to win, it does not require someone else to lose. It is easy to observe a person who has done well and assume that there must be persons elsewhere who had to lose something in order for this person to have gained. That is true of every political system and many simulated scenarios like sporting events, but nothing could be further from the truth in a market.
When exchange takes place in a free market, both parties trade something they want less for something they want more. Of course, either may change their mind later and regret the decision, but at the time of the trade both parties valued what they got more than what they gave, otherwise they would not have traded. It is easy to see how value is created on both sides (because economic value is subjective), and how there was no “loser.” Beyond this simple illustration, over the long run the wealth generation of capitalist trade grows the overall pool of valuable resources and increases choice for all involved. This means the potential for more and bigger “wins” as time goes on and specialization and trade increase. Wealth is created, not distributed.
Capitalism is not for the rich. If there’s any class or group that benefits more from capitalism than any other, it’s not the rich, but the consumer. Of course all of us, rich and poor alike, play the part of the consumer at various times. But it is an inescapable fact that in order to succeed in a market, you must create value for consumers. Ludwig von Mises sums this up nicely:
“The riches of the rich are not the cause of the poverty of anybody; the process that makes some people rich is, on the contrary, the corollary of the process that improves many peoples want satisfaction. The entrepreneurs, the capitalists and the technologists prosper as far as they succeed in best supplying the consumers.”
The rich do not live at the expense of the poor, nor do the rich feel particularly secure in a free market; they often seek government intervention to protect them from competition. But any gains to the rich not only are the result of creating value for the consuming public, they often lead to direct benefits for the poor over time by way of lower prices and access to new technologies.
Even the most selfish, peasant-hating rich person wants to buy fancy new luxuries. Whether they like it or not, being early adopters of such goods helps fund the continual production, research and development of new technology and can bring the cost of production down over time. There is not a modern convenience in existence that did not begin as a plaything of the super-wealthy. TVs, cars, washing machines, cell phones, etc., ad nauseam. If there were no wealthy customers around to purchase these impractical items, it would have been nearly impossible for producers to continue to refine them and lower the cost of production. Rich and poor can certainly dislike each other in a free market, but they cannot avoid helping each other.
Capitalism doesn’t concentrate power. Capitalism disperses power. If you look at the list of Fortune 500 companies 50 years ago vs. today’s list, you’ll notice some familiar names. You’ll also notice that the majority of top players 50 years ago don’t make the list today, and a great many of them don’t even exist. There was a time when Sears threatened to dominate the entire retail industry through its innovative catalog approach. The previous big players in the retail scene, themselves viewed by some as invincible, were put under by Sears. Is Sears a retail hegemon today? Neither will Wal-Mart be tomorrow.
Capitalism is relentless, and consumers want value. They may have brand loyalties, but those only go so far. At the end of the day, the dynamic process of creation, imitation and destruction constantly wreak havoc on the best predictions of who will control the market into the future. Were it not for massive government interventions—including things like anti-trust, which is purported to break-up vested interests but typically does the opposite—we would see even more dynamism and less concentrated power.
It may be a bit disconcerting to realize how dynamic the free market is. The good news is while corporations and products and methods of production are created and destroyed all the time, the human and material resources in the economy are redeployed. It may cause temporary dislocation, but the transition from buggies to Fords was very good for market participants, even though it killed some buggy companies.
Capitalism isn’t about taking advantage of people. In fact, it’s about people taking advantage of the opportunity it provides. I used the example earlier of price gouging. Higher prices after a disaster are sometimes seen as an example of people being fleeced by the market when they are the most vulnerable. But when we understand what’s actually happening when prices rise—those less desperate are encouraged to conserve so those who need resources most can get them; suppliers are signaled to deliver more goods to the affected area, etc.—we see that the market is doing more than any other system could to provide for those who need it most.
I’ve heard people talk about the way that businesses take advantage of employees and force them into subpar working conditions. Of course we all have to make choices, and we all wish our options were better than they are (which is why we work to improve them). But is it true that capitalism allows companies to take advantage of people’s needs? Possibly, but no more than people take advantage of companies’ needs.
If you’ve ever shopped at Wal-Mart, supposedly one of the worst offenders when it comes to taking advantage of employees, you’ve noticed that most of the employees are not very helpful. I once waited for 30 minutes to pick up something ordered online. The store was not busy and four or five employees saw me there and did nothing. A few said they were going on break and someone else would help me soon.
Some said nothing and just walked past, even when I tried to get their attention. When someone did arrive she was discourteous and messed up the check-out several times. I am far less likely to order from Wal-Mart after this experience.
If Wal-Mart is so good at exploiting employees, why were they unable to make them shorten their break to help me, or treat me with basic kindness, or master the proper checkout procedure? The answer is that Wal-Mart is not any better at getting what they want out of employees than employees are getting what they want out of Wal-Mart. The ease and regularity with which employees quit in the retail business is staggering, and employers often have to tolerate a lot of behavior that is detrimental to their profits to keep needed workers.
I don’t like to moralize about who’s exploiting who, but if we’re going to play that game we ought to consider the many ways in which employees, consumers and shareholders take advantage of managers, investors and corporations. It happens in both directions, but in a free market both are difficult to sustain in the long run. You have to serve other market participants, not cheat or exploit them. It’s not perfect, but capitalism does a better job of generating cooperation and limiting exploitation than any other system.
Capitalism doesn’t corrode our souls. Sure, free markets give us more choice and make us wealthier, but don’t they also make us crude, materialistic and shallow? It is true; in a more abundant market with lower costs, a person can more easily indulge their materialistic impulses. It is also true that countries where few go hungry also have more obesity. The cure is not to restrict the food supply.
A free market forces us to become people of character or suffer the consequences. We have more choices, which means the option of choosing things that are bad for us. But being deprived of choice altogether does not make us better people, just weaker people.
A person who has never lied because their tongue is cut out is not what we hope to become when we strive for honesty. Capitalism cannot corrode your soul, but it can provide you more modes of cultivating and expressing what’s in your soul—good or bad. You can’t escape ultimate responsibility for your choices under any system. Capitalism is up front about that.
When analyzing any social or economic system, the three most important words are:
“Compared to what?”
Capitalism has its shortcomings. It has shortcomings because life has shortcomings in our own subjective evaluations. That is, we can always imagine a state of affairs better than the one we experience. It is exactly this kind of imagination that has been the driver of human progress. However, when progress has been made it has been by a combination of imagination and an understanding of causal relationships that are unchangeable. The desire to fly, coupled with an understanding of physics, motivated people to create amazing contraptions from airplanes to rockets to parachutes. The desire to fly coupled with a denial of the force of gravity would lead to a much different experience.
When we feel frustrated with the morality of the free market, we should always ask what a better alternative might be. When you get down to it, there are few options. As previously explained, all government intervention is backed by the threat of violence. This is important to keep in mind when considering alternatives to capitalism.
If you think the price of a good is immoral, for example, ask yourself what you would do to address the problem. Price controls mean threatening violence to anyone who wants to sell above a certain price. Imagine storming to your neighbor’s garage sale with an armed thug and yelling, “Lower your prices or else!” Does that seem more moral than your neighbor peacefully putting an asking price on her old bowling shoes?
From a moral standpoint, since the alternatives to free markets mean coercion (whether partial intervention or complete control), it’s hard to imagine addressing the imperfections that can occur under capitalism with government action. Not to mention the fact that the interventions don’t work at achieving the desired results.
Most of the alternatives imagined by critics of capitalism either overlook the coercive nature of the state or rely on a superhuman, all-knowing, all-good state. But if people aren’t good enough to act justly in a market, how could they be good enough to wield government power over others? Sound social theory and historical evidence confirm that indeed, power tends to corrupt and absolute power corrupts absolutely. The difference between the power of a business tycoon in the market (assuming it’s a truly free market and he’s not in bed with government regulators) and the power of a government agent or politician is that the former can only woo while the latter can compel.
Much as you mightn’t like the perceived power that people can get in the market, state power is far more dangerous. Businesspeople don’t conscript customers into war or kicked-down doors, except when in cahoots with the state.
There is a philosophical term for the tendency to compare one system to an imagined utopia, rather than to other possible alternatives. It’s called the Nirvana Fallacy. This is a prevalent form of argument against markets. A common example is, “Capitalism hurts the poor.” But compared to what? Look at the evidence of free economies vs. less free economies.
Minimum wage is example of how this fallacy can lead to bad outcomes for the intended beneficiaries. It is a result of the notion that some people don’t make enough money. But compared to what? What alternative is there to free-market wages that can improve the lot of the poor? Minimum wage laws only price the poor out of the labor market.
If we’re honest and use some economic thinking, it becomes clear that even the things we don’t like in a market system are better than the alternatives. (Of course, this is not true for the elites who have mastered the art of gaining political power and favors. For them, markets are worse than corporatism. But aren’t these just the kind of people we would like to see face the rigors of competition and put in an honest day’s work?)
It’s not a very fun argument nor is it the most compelling, but the worst that can be said of capitalism is that it is the “least bad” economic system.
Many accusations against capitalism turn out to be accusations against reality itself. We want to eat our cake and have it, too. We don’t like scarcity, which means trade-offs and choices. We don’t like that some people have no taste for high art (which is why Creed sold more records than Jimi Hendrix), or that sometimes we enjoy cheap imported goods, or that fossil fuel allows us to do things that we find fulfilling.
Capitalism is the wrong target in these cases; we’re frustrated at other people for being different, or ourselves for not being the way we wish we were, or at nature for the materials it yields. We’re upset at cause and effect. Certainly we are justified in feeling unease at failings of those around us or the difficulties nature presents, but we need to look for solutions in reality, not fantasy.
It might seem great if everyone in the world could have twice as much of everything right now. But that’s not possible, and capitalism shouldn’t take the blame for that any more than cement should take the blame for the fact that falling on cement can produce a skinned knee. We should continue to envision a better world and strive to create it, but we shouldn’t pursue a world that’s not possible. Let’s make progress through the peaceful coordination of the market, not the false hopes of a “new man” or the eradication of economic laws created by state centralization and coercion.
(I should add that it is extremely difficult in this country to know whether it is a fact of life or some government policy behind many of the problems we confront. This should make us especially cautious of blaming capitalism, since so often it is a lack of capitalism that makes reality seem harsher than it is. There are innumerable difficulties, both big and small, that entrepreneurs have solved but regulators have perpetuated.)
Beauty is not often on lists with virtues like peace, honesty and humility. But true beauty is a virtue—it is awe-inspiring, praise-evoking and brings the kind of joy that humans seek for fulfillment. When I think of life’s best moments, beauty is involved; a sunset over Lake Michigan, my wife’s smile, a moving piece of music, my kids laughing, a good cigar. These experiences are sensory, emotional and, each in a different way, beautiful.
Odd as it may sound, I also feel a sense of awe when I walk in to a retail store and ponder the myriad products in front of me. Perhaps I’m a little crazy, but the more I think about it, the more beautiful capitalism is. There are times when I actually get choked up at the operations of the free market!
Consider, as Leonard Read famously did, the production of a simple pencil:
I, Pencil, am a complex combination of miracles: a tree, zinc, copper, graphite, and so on. But to these miracles which manifest themselves in Nature an even more extraordinary miracle has been added: the configuration of creative human energies—millions of tiny know-hows configurating naturally and spontaneously in response to human necessity and desire and in the absence of any human master-minding! Since only God can make a tree, I insist that only God could make me. Man can no more direct these millions of know-hows to bring me into being than he can put molecules together to create a tree.
The wonder only grows as technology progresses. Consider, “I, Smartphone.”
The products we consume for our survival and enjoyment are not produced by you, me or any of us. Yet they are produced by all of us. How does this happen? How can the provision of the most basic necessities of life be beyond the ability and comprehension of any of the individuals who need those necessities? There is profound beauty in this mystery of human cooperation.
If you’ve ever been moved by the observance of a stranger coming to the aid of another, nothing should move you more than the operations of the market. A group of volunteers cleaning up and rebuilding homes after a disaster is beautiful. But consider that the same disaster, if markets are allowed to operate, will cause millions of people living thousands of miles away to reduce their consumption of needed water, plywood, generators and flashlights so that those in the affected areas can get enough. It will induce complete strangers, some of whom don’t even know of the disaster, to channel their energies toward the production and distribution of goods to the victims of the storm. The market is so powerful, in fact, that it will induce even those who dislike the victims and would wish ill upon them to alter their behavior in ways that alleviate the sufferers.
There is daily innovation in a capitalist economy. Entrepreneurs are in relentless pursuit of ways to make their fellow man happier and better off. The cornucopia of products from around the world available to us in a moment’s notice is truly a miraculous exception to the experience of humans throughout history, and it is human creativity unleashed by free-market capitalism that has made it possible. Free and open exchange is one of the most awe-inspiring, community-enhancing, peace-loving, relationship-building, cooperative and coordinating things humans can engage in.
The fact that the prosperity of a capitalist economy is the result of the laws of nature and facts of human nature, rather than anyone’s conscious design, makes it all the more inspiring. Consider the unlikely way in which bees are the keepers of flowers; as they seek only their own survival they pollinate the flowers and produce a dazzling garden.
Likewise, it is utterly amazing that billions of individuals seeking to better their condition do more to promote the welfare of their fellow man than any direct effort to do so ever could. I don’t want to confuse by saying that capitalism does this, because capitalism, or markets, can’t do anything; they represent the interrelated actions of individuals. It is the action of individuals that make this complex mosaic of harmonious interests and outcomes. But make no mistake; capitalism is the only canvas on which such a work of art can be created.
That, to me, is enough to stand in awe of a genius creator who put things in place to allow for this; or, for the non-religious, a spellbinding universe that is like a benevolent conspiracy of good. Capitalism is what occurs absent the use of coercion in human relationships, where spontaneous order emerges. Capitalism is beautiful.
Enjoy it!
People often worry that unregulated markets will not sufficiently provide good things: education, charity, diversity of opinion, art, etc. It is also commonly believed that markets allow too many bad things: racism, discrimination, environmental degradation, consumer scams, low quality or dangerous products, etc.
The irony is that there is abundant evidence of just the opposite. The market provides too many good things and this infuriates certain interest groups who lobby for government to slow the provision, and it does not allow enough bad things so certain interest groups lobby for government to provide more of them. The reason is simple: in a market, everything has a cost. To indulge in racism, for example, one must be ready to bear the cost associated with not hiring the most productive workers, but only those of a certain race. In politics, to indulge ones racism is seen as costless. You can simply vote for the candidate who will enact a discriminatory policy.
Anytime you see a government policy it is evidence that whatever the policy is accomplishing was seen as being insufficiently accomplished by the market. In a market, no companies were engaging in deep sea oil drilling. It cost too much. Government enacted policies to shield them from liability and they began to drill further offshore.
In the market, very few under qualified people were borrowing money to buy a home and very few banks were giving out high risk loans to such borrowers. Government enacted policies to protect banks from the losses on riskier loans, and they got more of them.
We have immigration restrictions because the market does not discriminate against foreign workers enough to satisfy the tastes of some. A majority of voters want to restrict immigration or imports of foreign goods when it is put as a political question – it is free to voice such an opinion – but in the market, these very same voters behave in a way that demonstrates that they do not think such anti-foreign policies are good after all. Does anyone spend all the time researching where every worker comes from, or where every product is made and only buy products made entirely by American workers with American parts? No. It’s too costly to do so, even for the most ethnocentric among us. Plainly stated, the market makes nationalism too costly.
The fact that people have to lobby government to enforce immigration or trade restrictions proves that the market is not restricting these things enough. It does not deliver enough nationalistic sentiment to satisfy the jingoists.
Government enacted bans on interracial marriage because the market was allowing too many of them. The racists didn’t like it, but they were unable to convince enough people voluntarily so they had to request legislation. The market simply did not breed enough racism for them.
Minimum wage laws were enacted because the market was not racist enough. People may not have liked blacks very much, but even someone with mild racist sentiments had a hard time not hiring a black worker who was nearly as productive as and much cheaper than a white counterpart. Unionized white workers were unhappy with the market’s lack of racism, so they lobbied to create minimum wage laws which demanded all workers be paid at the level of higher skilled white workers. This made racism less costly in the market, and it is no surprise that it resulted in a rise in unemployed blacks.
Despite the immense crowding out effects of government provision of social services and education there is still a thriving non-government sector for education and charity – evidence that there is no market deficiency in these areas. Before government schools one of the arguments for them was in fact that there were too many, not too few, educational options and that the market was providing too diverse a range of educational products. Supporters of public education wanted to create more uniform and obedient citizens, and to do so they had to reduce the choice and abundance of education the market supplied.
Consumer safety regulations and trade licensing are passed at the behest of small groups who are frustrated by the overwhelming number of options markets provide to consumers. Consumers don’t want enough of a particular product to suit that producer, and they want too much of a competitor’s product, so restrictions are passed to reduce the number of good things the market provides.
Markets don’t breed enough conflict and war. Many people claim to want to exact vengeance or carry out justice in far flung parts of the world. In the market, almost no one will train themselves with firearms and head overseas to bring swift justice to tyrants. Nor will they pay a team of specialized killers to do it for them. It is too costly. So those who want it bad enough agitate for governments to carry out such adventurous schemes abroad with other people’s money, and many voters support it because they do not see a direct connection between their pocketbook or their conscience and the warfare waged.
Pioneers in the American West may not have liked the Native Americans much, but they were forced to find ways to get along because if they did not they stood to lose their lives or property. After the Civil War when US Troops were sent to the frontier to defend the pioneers, suddenly the cost of breaking a promise with the Indians was lower. If a settler encroached on Indian land they no longer had to defend themselves against the Natives, they had an army who would do it for them. It is no surprise that violence between settlers and Indians escalated. The market didn’t allow for enough conflict, so government subsidized it with the presence of the military.
People claim there are too many box stores in a town and they vote to ban Wal-Mart. Yet if there really were too many they could just as easily outbid Wal-Mart for the land on which to build the store, or simply not shop there so that Wal-Mart would be unprofitable in that town. Those methods bring real costs on to the people, whereas voting Wal-Mart down is perceived as “free”. The market does not allow enough indulgence of irrational dislike of corporations, so legislation is passed instead.
Where you can be sued by a property owner for polluting a river that runs on their property you don’t get a lot of production that pollutes rivers. It’s expensive. Not satisfied with this, advocates of industrial largesse get exemptions for corporations, or make waterways public property to lower the cost of pollution and get more of it.
When there is too much racism, environmental destruction, financial risk taking or other bad things there is nearly always a government policy making these things cheaper than they are in a free market. When there is not enough benevolence, consumer protection, choice, education or other good things, there is nearly always a government policy making these things more expensive than they are in a free market.
To understand this phenomenon, imagine if a grocery store surveyed all of the residence nearby and asked them to decide by a vote what items they should stock. Voting is free. How many people would vote for exotic or interesting items they may rarely buy, or vote for silly things just to be funny, or vote for things they think their fellow consumers ought to eat? It’s not hard to see that if a grocer’s stock was determined by voting, grocery stores would be terrible. People might vote for things they aren’t actually willing to buy when a price is put on it. When grocers instead rely on the market force of prices to determine what to supply, they get things people actually want, as revealed by their actions, not their words, and we are all better for it.
Politics is a perceived free way to indulge irrational biases that the market won’t support.
I am somewhat regularly blogging for LibertarianChristians as well as the Common Sense Concept. Check there for new posts if you are so inclined!
CSC archives (includes other authors as well)
A post I wrote about two years ago for the Western Standard:
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My wife and I were visiting a new place for Sunday morning service this week and I couldn’t help but be disturbed yet again at the tendency of Christians to mistake political for spiritual accomplishments.
The pastor told a story about a small church that is located in a “rough” neighborhood. Some parishioners were on the corner outside the church praying for the area when they ran into some drug dealers (I’m not sure how the churchgoers knew them to be drug dealers). The dealers told the prayers, “This is our corner” and the interceding churchmen replied, “No, this corner belongs to Jesus”. The pastor said one of the drug dealers was visibly moved and walked away saying, “this isn’t right what we’re doing. I’m going home”. The rest of the drug dealers stood their ground, so the church members retreated back into the church. So far, an interesting story.
Then, the pastor told us, the police showed up and arrested the remaining drug dealers on the street corner. Everyone listening to the story started clapping and shouting “amen”. The pastor used the story to illustrate the effectiveness of prayer, and the transforming power of the church located in the rough neighborhood.
This was all rather unsettling to me and my wife and as we discussed on our way home. Combined with the abysmal performance of the Detroit Lions, it put a bit of a damper on my day.
The part of the story where one drug dealer felt some kind of conviction and went home was interesting. The faith and words of the Christians on the corner apparently got him thinking deeply about his life. But what about those arrested by police? What victory is there for the church in that? There was no mention of any violent acts by these men. There wasn’t even mention of a violation of property rights (it was never clear if the corner was part of church property). There was only an assumption that these men were somehow “bad” and therefore their arrest was somehow “good” for the neighborhood, and ostensibly the Kingdom of God.
But how did this event advance the Kingdom of God? Is not the point of the Kingdom to transform lives? Is not the point to demonstrate the power of Christ to forgive and to move individuals to break free from the bondage of sin and embrace His forgiveness and live freely and righteously? What did this confrontation and arrest do for these men to help them see their need for freedom in Christ, if indeed they were in need?
Moreover, what grounds is there to cheer “amen” at the arrest of these men? It betrays a notion that runs deep in the church; that political action is analogous to spiritual action.
This same conflation was demonstrated some years ago when members of my church collected petition signatures sufficient to force a strip club to move from downtown to a location outside of town. This was touted as a victory. But in spiritual terms, who won? Did any of the petition signers go down and offer hope and freedom to the men in bondage to sexual addiction? Did they offer comfort and companionship to any of the strippers who were, purportedly, desperate for money and approval? Was a single soul set free? Did the patrons of the establishment have a new respect for Christians after seeing them forcibly remove the business from town? If anything, it set the stage for a more hostile relationship between strippers and patrons of the strip club and Christians. Banning sinful behavior by force of law is no signal to sinners that they can come to the church for freedom and aid.
Christ did not behave this way. Even when given the chance to use the laws of the day to punish a prostitute, He instead offered her grace and left her to make the choice on her own. He did not petition to hide sinful behavior from His sight, but spent much of His time hanging out with the least reputable sinners of society. He offered them hope and escape from damaging behavior, not prison.
When Christians look to laws of man to accomplish goals of the Kingdom they distort and corrupt both. All earthly governments are based on force. The Kingdom of God is based on love, freely given and freely received or rejected. Even the despotic, egotistical, and violent Napoleon saw this clear distinction in his last days exiled on the Island of St. Helena:
“Alexander, Caesar, Charlemagne, and I myself have founded great empires; but upon what did these creations of our genius depend? Upon force. Jesus alone founded His empire upon love…”
Why does the church so often fail to see what Napoleon understood? His Kingdom is truly, “not of this world”, and we shouldn’t reduce it to the activities and tools of earthly kingdoms – force, fraud, pomp, and patriotism.
An article I had published for the Freeman Online:
Ideas vs. Interests
Imagine a billboard that says, “Kicking chickens creates prosperity.”
The billboard is part of a campaign sponsored by the Partnership for a Chicken-Free America. This group is made up of people who have an extreme dislike for chickens, and they are willing to put vast resources into reducing the well-being of chickens. In fact, they advocate legislation to establish national Kick-A-Chick Day.
Most voters and members of the general public do not share this distaste for chickens as a species. Then again, most people are relatively indifferent when it comes to chicken happiness. With a few exceptions, it is not in an individual’s interest to spend resources on a counter-campaign or to hire lobbyists to oppose the Kick-A-Chick bill; the costs of doing so simply outweigh the benefits.
This is a classic case of concentrated benefits and dispersed costs. The anti-chicken people derive tremendous happiness from harm to chickens, making their campaign a worthwhile expenditure. Yet the general public gains little from preventing chicken kicking and the cost of opposing it is very high.
On the other hand, the public loves prosperity. If they believed that punting hens created wealth, there is little reason to suspect they would not support the policy. A public-awareness campaign would be just the ticket.
Armed with Public Choice theory we can see the sad but likely result. The chicken-free association will exert its influence and get its bill. The public will either support what they believe to be a prosperity-creating policy or ignore it altogether because the cost of fighting is too high. The interests align in such a way that we can expect the anti-bird forces to prevail.
Of course this story is absurd and such a law would never be introduced, let alone pass. What makes it so obviously impossible?
Ideas.
People know there is no causal connection between kicking a chicken and enjoying a higher standard of living. That knowledge makes the campaign laughable. Regardless of how the interests are aligned, if people are educated enough to know that chicken kicking does not equal prosperity such absurd policy will not be proposed, much less enacted.
Bus Conversion
Yesterday I saw a sign on the side of a bus which I found no less absurd. It read, “Converting buses creates jobs. What are we waiting for?” The ad was sponsored by a “clean air” association, which no doubt comprises members of the natural gas industry and people for whom a reduction in fossil fuel use would bring some great pleasure.
Just like our chicken story, the incentives are aligned so that the benefits of bus-conversion mandates to the members of this small group exceed the cost of their advocacy efforts, while the benefits to individual citizens of stopping the mandates do not exceed the cost of opposition. As far as incentives go, the situation seems pretty dire.
Unlike our chicken story, most people do not know there is no magical or “free” job-creation when government mandates bus conversions. The resources used to convert the buses must be taken from somewhere, and it is as likely as not they there are many other jobs destroyed or never created in the first place when the resources are redirected. Furthermore, most people do not know that there is no causal connection between more jobs and more prosperity or a higher standard of living. In fact, if a government mandate creates jobs, it is likely it does so precisely because it is destroying wealth by moving it from more-productive to less-productive (and more labor intensive) uses.
This is actually good news.
It means things are less hopeless than pure Public Choice theory might suggest. Bad incentives can be overcome by good ideas. In our chicken story it was clear that interests alone were insufficient to enact policy. Knowledge of the policy’s incoherence trumped the incentive structure. With a grasp of basic economics people may find the sign on the bus just as laughable as the idea of Kick-A-Chick Day.
Special interests can do much to destroy liberty given the incentive structure in our political system. Indeed, with an ignorant populace there is little they cannot do. But even the most powerful interests ultimately answer to the ideas held by a majority of citizens. Policy follows the path blazed by belief.
Mises stated this plainly in Human Action: “What determines the course of a nation’s economic policies is always the economic ideas held by public opinion. No government whether democratic or dictatorial can free itself from the sway of the generally accepted ideology.”
That is why FEE has tirelessly educated individuals on economic principles for these many years. That is why we must continue our educational efforts, no matter how frustrating it may sometimes be.
When we succeed, interest groups and their ploys will be shown to be just as ridiculous as the Partnership for a Chicken-Free America.