# Free Market: How would it work **URL:** \ **Category:** Great Debates\ **Created:** [October 25, 2004, 2:09am UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976 "2004-10-25T02:09:18Z")\ **Posts on this page:** 20\ **Page:** 7
**Author:** ![pervert](https://avatars.discourse-cdn.com/v4/letter/p/bbe5ce/32.png) [@pervert](https://boards.straightdope.com/u/pervert)\ **Post date:** [October 30, 2004, 12:11am UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/121 "2004-10-30T00:11:05Z")
> [@Frankenstein Monster](#): > > What would you call it, if the employer and employee “agree” on the salary - after heavy-handed pressure tactics bordering on intimidation by the prospective employee? Well, if it bordered on intimidation, why not call it intimidation? > [@](#): > > Or if the employer holds an irrational (and incorrect) belief that there is a lack of other candidates? This would be simply a mistake. > [@](#): > > What if the employer fails to follow due process out of irrational stubbornness? I’m not sure how you mean “due process” in this sentence. > [@](#): > > What if the employee and employer are both secret former Skull&Bones-buddies and this unconsciously (ha!) influences the outcome? What if they are former boy scouts and this influences the outcome? What if they are both African American? What if they are both women? I’d call this simply one of the many factors which peopl use in these situations. > [@](#): > > I’m just asking your opinion on terminology. Sure. Hope I answered all the question. I did not understand your use of the phrase “due process”, though. I missed that one. For the record in this thread, I have said before that we have a big problem in this country with crazy CEO compensation packages. I simply do not believe that they are somehow “anti market”. > [@Kimstu](#): > > This sounds like a pretty naive view of markets, though. Just because a company chooses to pay a certain salary doesn’t necessarily mean that’s The Free Market At Work ™. Sometimes, on the contrary, it’s avoidance of market forces through anti-market influences such as cronyism and managerial power. Well, my little question was not really meant to be a dissertation on the complete meaning of the phrase “market forces”. But no, it is not a naive view of markets. I cannot understand what you mean by “avoidance of market forces through anti-market influences”. Cronyism and managerial power are simply one of the things people use in making economic decisions (assuming you are not talking about the use of force). I offer my brother the job (or refuse to) because I know lots of things about him that I do not know about someone else. The truth is that you cannot reduce the free market to “the means of production”. It is much more complicated than that. As for your cite, can you define rent extraction? In the context of voluntary transactions? ---
**Author:** ![Frankenstein\_Monster](https://avatars.discourse-cdn.com/v4/letter/f/ccd318/32.png) [@Frankenstein\_Monster](https://boards.straightdope.com/u/Frankenstein_Monster)\ **Post date:** [October 30, 2004, 12:30am UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/122 "2004-10-30T00:30:01Z")
> [@pervert](#): > > Sure. Hope I answered all the question. I did not understand your use of the phrase “due process”, though. OK I used that term a little sloppily to mean an employer who didn’t do proper background checks, didn’t ask second opinions, didn’t involve parties he should have, etc.etc. Anyway I guess you don’t have a simple term for a fair market agreement arising out of a situation where those distorting factors played a dominant role in shaping the outcome. I would prefer to use some term that somehow stresses those factors. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [October 30, 2004, 12:34am UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/123 "2004-10-30T00:34:15Z")
> [@laigle](#): > > In a discussion about a free market, wherein those laws wouldn’t exist. Hence my comment that it’s lucky we don’t have a free market which would lead to the elimination of the laws underlying your course of action. Let’s move from the abstract to the concrete. Yes, indeed the laws would be **different**. But they wouldn’t be **non-existent**. If, for example, you required that I sleep with you in order to be hired, there would be no law to protect me. You would be including prostitution as part of my job duties. Prostitution would be legal, so I would have no legal remedy. Let’s not forget, though, that I still don’t HAVE to accept the job. You could not use PHYSICAL FORCE to make me to take the job. If, for example, you send thugs to my house and break all the windows because I won’t take the job, then that would still be illegal. ---
**Author:** ![laigle](https://avatars.discourse-cdn.com/v4/letter/l/ce7236/32.png) [@laigle](https://boards.straightdope.com/u/laigle)\ **Post date:** [October 30, 2004, 1:12am UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/124 "2004-10-30T01:12:51Z")
> [@John Mace](#): > > Let’s move from the abstract to the concrete. Let’s not. You can’t defend the merits of a hypothetical by saying it won’t happen. You can’t argue for a free market by saying it won’t really be free. If you don’t like the problems of the hypothetical framework, argue against its implementation. > [@](#): > > Yes, indeed the laws would be **different**. But they wouldn’t be **non-existent**. > > If, for example, you required that I sleep with you in order to be hired, there would be no law to protect me. You would be including prostitution as part of my job duties. Prostitution would be legal, so I would have no legal remedy. > > Let’s not forget, though, that I still don’t HAVE to accept the job. You could not use PHYSICAL FORCE to make me to take the job. Ah, but then you have the wonderful effects of market drive in place. If employers can require sexual favors of their employees, it will become a standard practice. If employers can require unpaid overtime, it will become a standard practice. If employers can chain you to the desk and force you to work at gunpoint until you die from exhaustion, it will become a standard industry practice. Anything that is generally attractive on the whole to management either at a personal and/or professional level will be generally practiced, unless there is an impediment. That means either complete labor organization (which in and of itself is an analog to government regulation) or legislative authority and enforcement. Sometimes that’s good, sometimes bad, sometimes neutral. And that’s where the coercive nature of the job market comes into play. You have to earn money to live this side of a Marxist pixieland. Not only that, since average wage level drives cost of living, you have to maintain a competitive level with your fellow members of the market. You can always choose to take one of the low-paying non-prostitutive jobs and the requisite lower standard of living, of course, but that is not the same as saying you are not being coerced. > [@](#): > > If, for example, you send thugs to my house and break all the windows because I won’t take the job, then that would still be illegal. Bad example. Better example: You can always choose not to pay the local Don’s protection money. His goons can beat you up, beat up your family, burn down your house, burn down your business, even kill you, but you can choose not to pay. Only when they break in and steal the money does it become coercion. That make any sense to you? Because it’s a non-starter for me. ---
**Author:** ![Shalmanese](https://avatars.discourse-cdn.com/v4/letter/s/45deac/32.png) [@Shalmanese](https://boards.straightdope.com/u/Shalmanese)\ **Post date:** [October 30, 2004, 2:21am UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/125 "2004-10-30T02:21:41Z")
I would say that the assertion that CEOs are paid anywhere near fair market value is absurd. CEOs have been paid hugely inflated salaries and the reason for that is that the public just didn’t care enough to stop it. The market failed in this instance and, once the public became aware of the problem, the market started finding solutions. Companies with excessively lavish CEO pay began to suffer in the marketplace and there were lawsuits brung against certain companies. The whole small shareholder/large shareholder company structure is starting to be questioned as well and we’re slowly working our way towards a solution. However, it still exposes a fundamental problem that the leaders of a company might not exactly have the interests of the company co-incide with their best interests. Say a CEO is planning to retire for good, whats to stop him from trying every dirty but legal trick in the book to pump up the stock price as much as possible and then cashing out and retiring for good? Once he’s out of the company, the market has no real effective mechanism for punishing him so it starts to look like an increasingly attractive proposition. How would a free market solve this? ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [October 30, 2004, 4:00am UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/126 "2004-10-30T04:00:05Z")
> [@laigle](#): > > Ah, but then you have the wonderful effects of market drive in place. If employers can require sexual favors of their employees, it will become a standard practice. If employers can require unpaid overtime, it will become a standard practice. If employers can chain you to the desk and force you to work at gunpoint until you die from exhaustion, it will become a standard industry practice. No, it doesn’t work that way. If it did, nobody in the US would be making more than minimum wage. Practically everyone working is. So I apply for a job, and my prospective employer requires me to fellate him to get the position. I say no, so he doesn’t hire me. Instead, I go work at another company. Maybe that company requires the same thing. Maybe they all do. Fine. I found my own company, and advertise that no one is required to prostitute themselves to work for me. And I make damn sure I abide by that policy, and develop a reputation that people believe in. Now I attract all the employees at all other companies who don’t like fellating their boss, and I hire them. I don’t even have to offer them a raise. I can even offer to pay 1% less, because lots of people would prefer to make 99% of their salary and not fellate the boss. Now my company is drawing on the huge labor pool of people who don’t like to be sexually exploited, and making more profit than anyone else. In the meantime, FellatioCo is having big problems. No women will work there, or only those who are desperate enough. Morale is in the toilet, the employees have zero loyalty, and share prices are dropping like Clinton’s pants. Forbes magazine has just declared me “Employer of the Year”, NOW has endorsed my business plan, and every single parent in the US thinks they would like their daughter (or son) to work for me. You cannot buy that kind of good will, and it didn’t cost me anything more than to keep my pants buttoned during job interviews. > [@laigle](#): > > Anything that is generally attractive on the whole to management either at a personal and/or professional level will be generally practiced, unless there is an impediment. Right. That ‘impediment’ is what we call the free market. Because the free market is a free labor market as well. There are no slaves here - people are free to sell their labor for as much as they can get, and nobody can force them to work if they choose not to. In a free market, management **and** labor are free. > [@laigle](#): > > Bad example. Better example: > > You can always choose not to pay the local Don’s protection money. His goons can beat you up, beat up your family, burn down your house, burn down your business, even kill you, but you can choose not to pay. Only when they break in and steal the money does it become coercion. > > That make any sense to you? Because it’s a non-starter for me. No, meaningless example. We have already mentioned that violence is against the law in our theoretical free market society. Regards, Shodan ---
**Author:** ![Frankenstein\_Monster](https://avatars.discourse-cdn.com/v4/letter/f/ccd318/32.png) [@Frankenstein\_Monster](https://boards.straightdope.com/u/Frankenstein_Monster)\ **Post date:** [October 30, 2004, 9:24am UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/127 "2004-10-30T09:24:35Z")
> [@pervert](#): > > Forgive me, but this is because you have a fundamental misunderstanding of what fair market means. I tried to fathom what it is that you think that I am misunderstanding. Came up with this. Imagine these scenarios: (a) I am applying for a job as a rocket scientist. The employer sees that I am the best and greatest rocket scientist around, ever to live, bar none. Employer offers me a generous compensation package, seeing that my amazing rocket designs are going to make him alot of money. (b) I am applying for a job as a rocket scientist. I am a mediocre rocket designer but I make sure to wear the flashiest, most expensive custom-tailored business suit. Silk tie and all. Candidate X is a much more competent rocket scientist but shows up in shorts and flip-flops. Impressed with my suit, and not all that knowledgeable himself about rockets anyway, employer offers me an overly generous pay package. (c) I am applying for a job as a rocket scientist. We talk about my uncle Tony, the well-regarded “businessman” in this part of town. I mention that uncle Tony, he really thinks I’m the man for this job, you know what I’m saying? I make it clear that “his goons can beat you up, beat up your family, burn down your house, burn down your business, even kill you, should you choose not to hire me”. Which ones of these constitute “distortions”? Which ones are the cases where it is not a fair market? Now, imagine that Congress decides to step in, and make sure that we have Fair Markets once and for all. They pass, with overwhelming majority, the Seventeen-thousand-three-hundred-and-sixty-first Constitutional Amendment, aka the Fair Market Amendment, regulating, in the name of an _even_ more Perfect Union, the exact dollar amount and perks that shall be paid in remuneration to all Rocket Scientists gainfully employed in the United States. Eliminating, in one fell swoop, all the distortions, including that most nefarious one, number (a). Would _that_ be a fair market? Anyway, I think I can see where you are coming from. But still prefer the way I said it in the beginning. ---
**Author:** ![Kimstu](https://avatars.discourse-cdn.com/v4/letter/k/ecd19e/32.png) [@Kimstu](https://boards.straightdope.com/u/Kimstu)\ **Post date:** [October 30, 2004, 11:14am UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/128 "2004-10-30T11:14:34Z")
**pervert:** \* Cronyism and managerial power are simply one of the things people use in making economic decisions (assuming you are not talking about the use of force).\* But they are not the sort of things that are included in the ordinary usage of terms like “free markets” or “market competition”. If Jack is applying for a CEO job, and the company could hire any one of a hundred people as good as Jack for $200K in salary, but the board decides to offer Jack $800K just because they’re his friends and they want to help him get rich, then $800K is **more** than the fair market price. The board chose to pay **more** than the price set by supply and demand for a product of equal quality. This is not the way that competitive markets are assumed to work. Using “free market” in the strict sense to mean only “transactions devoid of government regulation except for protection of rights and enforcement of contracts” can be somewhat deceitful. Generally, people advocate “free markets” based on the advantages of **ideal** free markets, in which competition is perfect and anti-competitive disruptions such as knowlege bias and monopolistic practices don’t exist, so outcomes are very successfully optimized. Then when it’s pointed out that real-world markets often **do** have such disruptions that impede their efficiency—as in this example of setting CEO salaries non-competitively—the market advocates retreat into the more general definition of “free market” to argue, “Oh, but all these disruptions are just **part** of the free market!” The point is, though, that the disruptions are a **counterproductive** part of the free market, which interfere with its efficiency. **pervert:** _As for your cite, can you define rent extraction? In the context of voluntary transactions?_ The article I mentioned (whose full PDF text **FM** gave a link to) explains its use of the term thus: > [@](#): > > The excess pay that executives are able to extract because of their positional power constitutes rents. Specifically, the amount of rents that an executive extracts is the excess of the pay obtained by him over what he would have received under a contract that maximizes shareholder value. I get the feeling you would like to argue that “in the context of voluntary transactions” there’s no such thing as rent extraction, because any price that the buyer and seller agree on for any reason—nepotism, cronyism, unequal knowledge, and managerial power included—is the valid market price. But this is just an example of the doublespeak I mentioned above. If free markets are defined merely as “unregulated transactions” including all sorts of market failures and disruptions, then there’s no reason to assume that they will be efficient in the way that **ideal** free markets are. And therefore there’s no reason to assume that they’re necessarily any better than regulated markets. ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [October 30, 2004, 12:30pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/129 "2004-10-30T12:30:13Z")
> [@Frankenstein Monster](#): > > I tried to fathom what it is that you think that I am misunderstanding. Came up with this. Imagine these scenarios: > > (a) I am applying for a job as a rocket scientist. The employer sees that I am the best and greatest rocket scientist around, ever to live, bar none. Employer offers me a generous compensation package, seeing that my amazing rocket designs are going to make him alot of money. > > (b) I am applying for a job as a rocket scientist. I am a mediocre rocket designer but I make sure to wear the flashiest, most expensive custom-tailored business suit. Silk tie and all. Candidate X is a much more competent rocket scientist but shows up in shorts and flip-flops. Impressed with my suit, and not all that knowledgeable himself about rockets anyway, employer offers me an overly generous pay package. > > © I am applying for a job as a rocket scientist. We talk about my uncle Tony, the well-regarded “businessman” in this part of town. I mention that uncle Tony, he really thinks I’m the man for this job, you know what I’m saying? I make it clear that “his goons can beat you up, beat up your family, burn down your house, burn down your business, even kill you, should you choose not to hire me”. > > Which ones of these constitute “distortions”? Which ones are the cases where it is not a fair market? Only the last. It’s been pointed out at least twice that violence and extortion are still illegal in our theoretical free-market society. The point of the free market is not that it is always perfect. The point is that it tends to be self-correcting. You hire Marvin Mediocre, Ph.D., in the flashy suit. It turns out he cannot make the grade, and, to the extent that this one scientist determines profit or loss, you suffer a loss. Thus the tendency is to get rid of Marvin and hire somebody else. If you are smart - that is, “efficient” in the economic sense of the term - you have learned to look beyond the suit and discover what it is that makes for a successful rocket scientist. If you have, you hire someone else and the market rewards you with profits. If not, Spacely Sprockets hires all the good scientists in flip-flops and drives you out of business. This is an efficient use of resources. Spacely Sprockets is more efficient than you are in using the limited resources available - rocket scientists, among other things - and thus tends to stay in business and make a profit. You are less efficient - in recognizing talent among other things - and thus tend to go out of business and lose money. The free market is pushing you to go do something else that you are more efficient at doing - digging ditches, selling wombats, anything - that you do better than building rockets. The free market is predicated on the exchange of information. Price is a reflection of that exchange. Supply of X is so much, demand for X is so high, therefore the price of X is such and such. A change in any of the myriad factors affecting supply or demand or both will tend to be reflected in the price. > [@Frankenstein Monster](#): > > Now, imagine that Congress decides to step in, and make sure that we have Fair Markets once and for all. They pass, with overwhelming majority, the Seventeen-thousand-three-hundred-and-sixty-first Constitutional Amendment, aka the Fair Market Amendment, regulating, in the name of an _even_ more Perfect Union, the exact dollar amount and perks that shall be paid in remuneration to all Rocket Scientists gainfully employed in the United States. > > Eliminating, in one fell swoop, all the distortions, including that most nefarious one, number (a). > > Would _that_ be a fair market? No, it’s not. Only © is a distortion, and it is illegal already. Besides, there is no “exact dollar amount and perks” that a Rocket Scientist is worth. The price of hiring a rocket scientist is a reflection of the interaction between how many rocket scientists are available, and how much people think they want rockets compared with how much they want everything else. I think many of the misconceptions in the scenarios listed are based on one big misconception - that there are two prices for everything. It seems to be getting implied that one price is what something actually costs, and the other is what the same thing “should” cost. The second is a figment of the imagination. There is no such beast. Everything is worth exactly what you can get for it - no more, no less. It matters not at all how hard you worked to create it, or how badly you need the money, or how much other stuff that **you** think is equivalent costs. Whatever you have to sell is worth exactly what you can convince somebody else to pay for it. If a CEO can convince the board of directors that he is worth $100 million, then that is the going rate for that particular CEO. And the market will communicate if that is reflective of the supply of CEOs and the demand for their services. If it is, the cost of hiring a CEO will tend to rise to $100 million, **and** companies that pay their CEOs $100 million a year will tend to stay in business and make a profit. Because they will discover that they cannot hire the best people for less than that, and that companies that don’t pay $100 million a year tend to lose out to those that do. If $100 million is too much, then those lucky or far-sighted companies who refuse to pay that much will hire someone else for $10 million a year, and will make more profit (on average) than the dummies who are over-paying their CEOs. And CEOs whose marginal cost of hiring is $100 million a year only will tend to be unemployed. All this is in the long run, and there are many, many other factors involved. There is no guarantee that this one factor will entirely control whether the company actually makes a profit or not. But that is the tendency. And the price of a CEO is determined entirely independently of what you or I think a CEO “should” be making. We get to determine that only when we decide if the price the company is charging for its products or services is what we want to pay. If it is, we buy the product or service, and the company tends to make a profit. If not, we buy from someone else, and the company tends to lose money. That’s how the free market operates. Messy, certainly, and often imperfect. But better and more efficient than any other system. Regards, Shodan ---
**Author:** ![Kimstu](https://avatars.discourse-cdn.com/v4/letter/k/ecd19e/32.png) [@Kimstu](https://boards.straightdope.com/u/Kimstu)\ **Post date:** [October 30, 2004, 12:43pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/130 "2004-10-30T12:43:24Z")
**Shodan:** \*The point of the free market is not that it is always perfect. The point is that it tends to be self-correcting. \* But in real-life markets, how long should we have to wait, and how much inefficiency should we have to put up with, before the self-correction kicks in? If market self-corrections are too slow to prevent market distortions wreaking serious economic damage, the claim that unregulated markets are really “better and more efficient than any other system” starts looking much less convincing. ---
**Author:** ![Kimstu](https://avatars.discourse-cdn.com/v4/letter/k/ecd19e/32.png) [@Kimstu](https://boards.straightdope.com/u/Kimstu)\ **Post date:** [October 30, 2004, 12:49pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/131 "2004-10-30T12:49:09Z")
Once again, this seems to be an example of the economic doublespeak I mentioned above: A. **Ideal** free markets work really well and are very efficient. B. Real-life free markets are sorta like ideal free markets in some respects, although they have lots of distortions and inefficiencies. C. Therefore, real-life free markets **must** be as efficient as practically possible, and regulation can only impair their efficiency. This is a very weak and unconvincing argument, and I think the only reason it ever sounds persuasive is because people tend to conflate the concepts of ideal free markets and real-life free markets. ---
**Author:** ![Leonard](https://avatars.discourse-cdn.com/v4/letter/l/a6a055/32.png) [@Leonard](https://boards.straightdope.com/u/Leonard)\ **Post date:** [October 30, 2004, 1:03pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/132 "2004-10-30T13:03:02Z")
What is required is a comparison of costs between the imperfect market conditions of the real world, and the surplus/shortage that would be created by controlling prices. That’s no simple feat. Pretty much any analysis will be disputed either way. Which will more than likely bring us back to one of the basic values that most of our economic decisions are based on. Which do you value more, liberty or equality? (and that one’s not particularly enjoyable to argue) ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [October 30, 2004, 1:06pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/133 "2004-10-30T13:06:17Z")
> [@Kimstu](#): > > Once again, this seems to be an example of the economic doublespeak I mentioned above: > > A. **Ideal** free markets work really well and are very efficient. > > B. Real-life free markets are sorta like ideal free markets in some respects, although they have lots of distortions and inefficiencies. > > C. Therefore, real-life free markets **must** be as efficient as practically possible, and regulation can only impair their efficiency. > > This is a very weak and unconvincing argument, and I think the only reason it ever sounds persuasive is because people tend to conflate the concepts of ideal free markets and real-life free markets. No, that is not the argument. A. **Real** free markets work fairly well, and are fairly efficient. They tend to correct the distortions and inefficiencies inherent in all human interactions. B. Everything else is sorta like real free markets, except that they are less efficient and subject to far more distortions and inefficiences, which are much slower to be corrected. C. Therefore, real-life free markets **must** be as efficient as practically possible, and we must resist the temptation to make them less so. Regulation is one means of keeping the free market working efficently, so long as it is not based on economic misconceptions. Some of those misconceptions are the notion that something “should” cost other than it does, or that the government can more efficiently set prices than supply and demand, and so forth. > [@](#): > > But in real-life markets, how long should we have to wait, and how much inefficiency should we have to put up with, before the self-correction kicks in? As long as it takes. You don’t really have any choice. There is no mechanism that works better than the free market in correcting excesses. Government action is much less efficient, and often done for reasons other than the stated ones. Plus, what you refer to as “economic damage” is part of the correcting mechanism of the market, and cannot be avoided. Often you can shift costs away from those who incurred them, but you can almost never make them go away. Regulation is perfectly acceptable if it facilitates the operation of the free market. That is, it is a good thing to enable the exchange of information necessary to transactions, or to eliminate coercion, or to enforce contracts and the rule of law, or ensure a stable medium of exchange. But there ain’t no free lunch, and most attempts at managing the marketplace are no more than robbing Peter to pay Paul. And this is almost always a bad idea in the long run, no matter what Paul tells you. Regards, Shodan ---
**Author:** ![JMS\_CCT](https://avatars.discourse-cdn.com/v4/letter/j/bbe5ce/32.png) [@JMS\_CCT](https://boards.straightdope.com/u/JMS_CCT)\ **Post date:** [October 30, 2004, 1:47pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/134 "2004-10-30T13:47:20Z")
> [@rfgdxm](#): > > Correct on the first paragraph, and wrong on the second. Libertarian philosophy is based on freedom of contract. Any sane legal system would recognize that the under-five market would be too immature to contract, as they could not understand risks. Thus if Phillip-Morris were to market crack and cigarettes to kids, they could be sued for unlawful death. > > However, libertarians would argue that adults do have the ability to assume risks. Thus, the could market crack to adults. I will point out to you that before the early 20th century, there were **no** laws prohibiting the sale of drugs. Cocaine was widely marketed. > > [Mass of US Cocaine Consumption - The Physics Factbook](http://hypertextbook.com/facts/2003/JoshSchaikowitz.shtml) > > “During the last 19th century and early 20th century, cocaine was legal and hailed as a miracle drug by names such as Sigmund Freud, Pope Leo XIII, Jules Verne and Thomas Edison. It was sold in drug stores to cure headaches, toothaches and to relieve stress.” > > Thomas Edison was quite a fan of cocaine laced wines. These sure didn’t ruin his life. You grossly exagerate the dangers of cocaine, and the intelligence of people to recognize them. And the US sure managed to do OK in all those years when cocaine was legally available. Prohibition of drugs does more harm than good. Alcohol prohibition in the US was abandoned when this was realized. Hopefully some day the same will be true for cocaine, opiates, etc., and they once again become available to adults. Here, here! The Christian fundamentalistist, moralist right wing’s “fundamental” error is that they think God has called them to “clean up” society through the force of law. This is because they fail to understand that the world is presently in a period of grace, where God is in a “hands off” mode, leaving man to his own free will. If the God they say they believe in isn’t trying to straighten the world out, why should they think He’s called them to do it? Which brings up this proposal: Return our criminal court system back to the _Common Law Rule of Harm_, i.e., there must be proven to have been demonstrable harm perpetrated by one individual upon another individual (or a business, institution, etc.), before they can be charged with a crime. We’ve got to get out of the mindset that the government, through the courts and the force of law, has the responsibility to protect us from harming ourselves; or, through the force of law, preventing any and all individual behaviour that \*might result \* in criminal acts. In a nutshell: Unless one has actually caused harm to another, they cannot be charged or indicted with a crime. This must be in place for a truely free market to exist. ---
**Author:** ![Zagadka](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/zagadka/32/7272_2.png) [@Zagadka](https://boards.straightdope.com/u/Zagadka)\ **Post date:** [October 30, 2004, 3:05pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/135 "2004-10-30T15:05:19Z")
Yay for income disparity! ---
**Author:** ![Gorsnak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/gorsnak/32/7587_2.png) [@Gorsnak](https://boards.straightdope.com/u/Gorsnak)\ **Post date:** [October 30, 2004, 4:04pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/136 "2004-10-30T16:04:34Z")
> [@Shodan](#): > > A. **Real** free markets work fairly well, and are fairly efficient. They tend to correct the distortions and inefficiencies inherent in all human interactions. So, would you care to take a stab at answering the questions I posed concerning externalities above? How will a “real” free market correct distortions that are built into it? ---
**Author:** ![Frankenstein\_Monster](https://avatars.discourse-cdn.com/v4/letter/f/ccd318/32.png) [@Frankenstein\_Monster](https://boards.straightdope.com/u/Frankenstein_Monster)\ **Post date:** [October 30, 2004, 4:17pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/137 "2004-10-30T16:17:41Z")
> [@Shodan](#): > > think many of the misconceptions in the scenarios listed are based on one big misconception - that there are two prices for everything. It seems to be getting implied that one price is what something actually costs, and the other is what the same thing “should” cost. Just to clarify, I didn’t mean to imply that there is anything like this. My concern was, there is one price, which is what something actually costs, but is that the economically optimal price? I didn’t spell it out, but what I wanted to illustrate is that I am including a judgment of ethics in my definition of “fair market”. I will butt out now, because **Kimstu** is making my point a whole lot better than I am. Especially that bit about the distinction between “free markets” and “ **ideal** free markets”. ---
**Author:** ![Frankenstein\_Monster](https://avatars.discourse-cdn.com/v4/letter/f/ccd318/32.png) [@Frankenstein\_Monster](https://boards.straightdope.com/u/Frankenstein_Monster)\ **Post date:** [October 30, 2004, 4:33pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/138 "2004-10-30T16:33:08Z")
If I may, one illustration of the issues we’re discussing. “Chainsaw” Al Dunlap. Never created any value. Intimidated the people he worked with and created a poisoned work atmosphere. _Never produced one cent of real profit._ Instead, created an illusion of profit through illegal or, at best, materially misleading accounting maneuvers. Enough to accrue fat bonuses to himself. All the while running the company into the ground. From the start, had mapped out his strategy on how eventually to get away with it, too. His reputation was based on nothing more than having pulled it off before. Leaving in his wake the corporate equivalent of death and destruction. Part of it was maybe plain scamming. But a big part was moving in buddy circles that were _predisposed_ to believing his methods and were not inclined to dig too deep into his “achievements”. Don’t remember if he ever went to jail. I can surely imagine he was clever enough to never break the law, or more accurately, to never get caught breaking any law. In any case he was barred by the SEC from ever serving as CEO in any business again. Left alone to enjoy the fruits his ill-gotten millions. All this was described in a detailed Wall Street Journal article some time ago. So it must be not only true, but fair and balanced, too. ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [October 30, 2004, 6:16pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/139 "2004-10-30T18:16:41Z")
Hi, **Gorsnak**. You posted: > [@Gorsnak](#): > > 1. Negative externalisms. Sometimes some of the costs of production aren’t borne by a manufacturer. The classic example is air pollution, where a factory can spew out gobs of pollution at no significant cost to itself, yet a significant cost is borne by the community around the factory in the form of decreased air quality. Pollution isn’t the only negative externalism, but it’s probably the most serious one. Could any free marketeer here explain to me how an issue like air pollution can be dealt with absent governmental regulation? I don’t believe any of the free marketers here believe that our theoretical society has no government regulation. At least, I don’t. I would support government regulation that prevents coercion, enforces contracts, and the other things I mentioned earlier. Pollution is a good example. I can think of a number of ways to deal with it. One recent example is the “pollution credit” idea, where companies can buy and sell the right to emit a certain level of pollution, so that, if they can come up with clever ways of reducing their emissions, they have something of value to sell, and thus recoup the cost of the research. Then if you set the overall level of allowed pollution lower than it currently is, you have encouraged companies to put their energies into addressing the problem. I can also see allowing lawsuits against polluters. In all these instances, I am trying to include the costs of pollution in the equation, so that those who create the problem have to bear the cost of cleaning it up. If we have our theoretical society of totally free markets, the cost of clean up is going to be included in the consideration of what products to produce, and how to produce them. This is an enhancement of the free market, not a reduction of it. > [@Gorsnak](#): > > 1. Positive externalities. Just as sometimes the costs of something aren’t borne by its producers, sometimes the benefits of something can’t be recouped by its producers. Many items that are arguably of this sort have traditionally be produced to some extent or other by governments - roads, education, health care, etc. An educated populace will result, other things being equal, in a more productive workforce and greater wealth for all. Sure. But I don’t see why education has to be a government monopoly. If education is as good a thing as you suggest (and as I agree), then there will be a demand for it. Parents want to educate their children so they can get jobs, companies want an educated workforce. Thus, private schools would exist in our theoretical society as much as public ones do now. But they would have to compete for students and the funds to educate them. > [@Gorsnak](#): > > Roads and other infrastructure are arguable similar in producing generalized benefits that make them collectively rational but individually irrational to produce (or at least, to produce to the extent desirable). I doubt that. There is demand for roads to allow me to get where I am going. Whether I pay for this with taxes or tolls is largely a matter of definition. I have to get going, I am sorry to say. I will try to get back to this thread later and address the rest of your issues. Regards, Shodan ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [October 30, 2004, 6:25pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/140 "2004-10-30T18:25:59Z")
> [@laigle](#): > > Let’s not. You can’t defend the merits of a hypothetical by saying it won’t happen. You can’t argue for a free market by saying it won’t really be free. If you don’t like the problems of the hypothetical framework, argue against its implementation. But what is the use of arguing about some abstract “intimindaion” without understanding exactly what that intimidation is? There are forms of “intimindation” that are perfectly legal now. Bringing this debate to a discussion of concrete examples is exactly the way to address it. > [@](#): > > Ah, but then you have the wonderful effects of market drive in place. If employers can require sexual favors of their employees, it will become a standard practice. If employers can require unpaid overtime, it will become a standard practice. If employers can chain you to the desk and force you to work at gunpoint until you die from exhaustion, it will become a standard industry practice. Patently false No employer today is required to pay more than min wage, yet most people make more than that. Why? Frankly your “desk chaining, gunpoint” example tells me your not interested in an honest debate here. Good luck finding someone willing to respond to that type of argument. [Previous page](https://boards.straightdope.com/t/free-market-how-would-it-work/270976.md?page=6) [Next page](https://boards.straightdope.com/t/free-market-how-would-it-work/270976.md?page=8)