# 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:** 8
**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, 6:46pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/141 "2004-10-30T18:46:20Z")
> [@Shodan](#): > > 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. > 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 Thats bullshit, no competent economist would dare stand up and make such a statement. what an object **should** cost is the marginal utility that object imparts upon a rational agent. That is, if that money could have been spent in a different way to make the spender “happier”, then that money is being spent inefficiently. So far, theres been a lot of wishy washy handwaving on the side of the freemarketers yet they seem to be remarkably weasally when asked to back up their assertions with anything but vague handwaving. Somehow, innovation comes from thin air, venture capital fund is never impossible to get and there are a million entrepreneurs in every single field waiting for the slightest misstep to jump in and every single field can be entered by a single man with a couple of bucks of venture capital. Again, I present some questions that have so far been studiously avoided in this thread: 1. Prove that monopolistic bundling provides no advantage to the incumbent when moving into seperate related fields or prove that such monopolistic bundling is actually a desirable element of the market. 2. Provide a plausibe scenario for the case where Intel knocks AMD and IBM out of the processor market and becomes a monopoly, a new entrant comes into the market and breaks this monopoly. 3. Provide a mechanism for the free market to deal with positive and negative externalities or prove that such externalities do not exist. 4. Provide a reason why a rational, clear thinking CEO about to retire would not do as much as legally possible to pump up their stock price before selling out. 5. Assume that CEO payment in certain industrys at the present stage is exorbiant, ie: above what marginal utility theory would suggest, and that we are in a ogliopolistic market place like investment banking, ie: you can’t just magically wish new companies out of thin air as a deus ex machina, provide a mechanism to adjust CEO compensation to be more in line with market rates. 6. Provide a mechanism for dealing with what would be presumably legal but generally regarded as immoral co-ercion in the market place (small inventor in a basement invents a way to get 100Mpg from fresh water. Big Oil takes notice and wants to buy it off him but he refuses. He goes into production but mysteriously, everything starts going wrong, suppliers are late and their products are off spec, electricity is unreliable and theres constant streetwork meaning delivery trucks can’t get through. Even though his ideas are great, he is unable to produce a single widget and goes bankrupt) 7. Provide a mechanism for fairly allocating space on a commons and punishment for those who do not keep to it(ie: Each television station broadcasts on it’s own defined band. During primetime, one TV station hires a group of thugs anonymously to spray random garbage through all the other spectrums so the only TV station with reception was theirs) ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [October 30, 2004, 6:50pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/142 "2004-10-30T18:50:40Z")
How come arguments around capitalism always wind up devolving into discussions of individual acts, as though that disproves the whole thing? And how come when discussing the merits of governments, pointing out the numerous cases of fraud, corruption, and incompetance are dismissed as being beside the point? It’s frustrating in the extreme to laboriously describe how the market works, how it prevents a race to the bottom, and how it is self-regulating, and the response is, “Oh yeah? What about Ivan Boesky? HUH???” No one said that Capitalism is utopia. No one has said that there will never be crooks, or even honest people who happen to be in a place where they gain a disproportionate advantage. What we are arguing is not the perfection of Capitalism, but whether it is, on balance, a better system than government regulation of economic affairs. In every system you will find corruption and people that take advantage. I imagine most of you anti-capitalists are strong supporters of labor unions. Would you consider it a valid refutation of the labor movement if I pointed out that the Teamsters in the past have been horrible corrupt and in bed with the Mob? Should we make a list of all the government officials who have been charged with accepting bribes, extorting favors, or who have been completely corrupted by special interests who fund their campaigns? And again, for those of you who keep saying that under capitalism our workers will become slaves, our products shoddy, and our CEOs a bunch of criminals, you need to explain _why this hasn’t happened_. As I’ve said before, the vast bulk of our economic transactions occur freely. Why aren’t all workers making minimum wage? Why aren’t all of our good cruddy sweatshop products? Why aren’t all of our products manufactured only to minimum safety standards? Why aren’t our factories only barely as safe as government will allow? If you can’t explain that, you don’t understand capitalism, and you are engaging in nothing more than argument by strawman. ---
**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, 7:03pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/143 "2004-10-30T19:03:15Z")
[QUOTE=John Mace] 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. [quote] No it isn’t, it’s rhetorical three card monte. The free market argument is for the removal of controls. The discussion of what should and shouldn’t be illegal intimidation presupposes a regulated market. Once you accept that brute intimidation is bad and that government should prevent it, the debate about a free market is over. > [@](#): > > Patently false No employer today is required to pay more than min wage, yet most people make more than that. Why? Because there are economic advantages to doing so, namely the ability to attract skilled labor. There are laws against dumping hazardous waste anywhere you please, but people still do. Why? Businesses will do what they consider to be in their best economic interest. Ethics does not appear in a ledger. Legality does, but only as a cost to be balanced. ---
**Author:** ![erislover](https://avatars.discourse-cdn.com/v4/letter/e/71e660/32.png) [@erislover](https://boards.straightdope.com/u/erislover)\ **Post date:** [October 30, 2004, 7:05pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/144 "2004-10-30T19:05:18Z")
> [@Sam Stone](#): > > Would you consider it a valid refutation of the labor movement if I pointed out that the Teamsters in the past have been horrible corrupt and in bed with the Mob? I can’t speak for others, but the corruption and coercion some unions have been a part of _do_ reflect poorly on them. I don’t see why it wouldn’t. The interesting thing, however, is that if the market treated people well, labor unions would have a hard time getting off the ground, because rational or even semi-rational agents wouldn’t jeapordize their opportunities to align themselves with a movement that has the very real possibility of ruining their job. > [@](#): > > Should we make a list of all the government officials who have been charged with accepting bribes, extorting favors, or who have been completely corrupted by special interests who fund their campaigns? Yet your own contention remains true. No one has argued that the government will create a utopia, either, but that it certainly can temper some of the less desirable effects of a free market. Does that bring its own problems? Yes! Is the government also self-correcting? Some are. Will people also congregate and rise up against the government like workers congregate and rise up against poor treatment by employers? Obviously. > [@](#): > > And again, for those of you who keep saying that under capitalism our workers will become slaves, our products shoddy, and our CEOs a bunch of criminals, you need to explain _why this hasn’t happened_. As I’ve said before, the vast bulk of our economic transactions occur freely. But no one in this thread has suggested we operate in a free market in the sense of the OP. So, uh, huh? ---
**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, 7:14pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/145 "2004-10-30T19:14:34Z")
> [@Sam Stone](#): > > How come arguments around capitalism always wind up devolving into discussions of individual acts, as though that disproves the whole thing? > > And how come when discussing the merits of governments, pointing out the numerous cases of fraud, corruption, and incompetance are dismissed as being beside the point? > > It’s frustrating in the extreme to laboriously describe how the market works, how it prevents a race to the bottom, and how it is self-regulating, and the response is, “Oh yeah? What about Ivan Boesky? HUH???” > > No one said that Capitalism is utopia. No one has said that there will never be crooks, or even honest people who happen to be in a place where they gain a disproportionate advantage. What we are arguing is not the perfection of Capitalism, but whether it is, on balance, a better system than government regulation of economic affairs. > > In every system you will find corruption and people that take advantage. I imagine most of you anti-capitalists are strong supporters of labor unions. Would you consider it a valid refutation of the labor movement if I pointed out that the Teamsters in the past have been horrible corrupt and in bed with the Mob? Should we make a list of all the government officials who have been charged with accepting bribes, extorting favors, or who have been completely corrupted by special interests who fund their campaigns? > > And again, for those of you who keep saying that under capitalism our workers will become slaves, our products shoddy, and our CEOs a bunch of criminals, you need to explain _why this hasn’t happened_. As I’ve said before, the vast bulk of our economic transactions occur freely. > > Why aren’t all workers making minimum wage? Why aren’t all of our good cruddy sweatshop products? Why aren’t all of our products manufactured only to minimum safety standards? Why aren’t our factories only barely as safe as government will allow? > > If you can’t explain that, you don’t understand capitalism, and you are engaging in nothing more than argument by strawman. I understand all the free market arguments. Hell, I’ve argued them enough times when appropriate. I’m not in any way a socialist or reactionary, on a scale of left to right, I’m pretty damn far right economically. But, so far, the responses the ardent free marketers have put up make me as about as embarrased as atheists are to Madaline Murray O’Hare or christians are to fundamentalists. None of the 7 questions I have put up are specific nitpicks or small transgressions, there are all dealing with **structural** problems that were raised in the debate about how a free market system would work. More specifically, they are structural problems that, in the current political and economic system, are regarded as generally functioning fairly well but would seem to me to break down under a pure free market system. This is not the thread to debate the failures of the government regulated system, that would be in “Government Regulation: How ould it work” which will hopefully be put out sometime in the near future but this is a debate about the **free market** and, as such, such comparisons are beside the point unless directly related to free markets. I’ve deliberatly left out some of the, what I regard, more absurd assertions by the anti-free market side such as races to the bottom and the like but what remains is still pretty substantial. Unless you care to address these issues, it’s **you** who is battling with straw men. ---
**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, 7:26pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/146 "2004-10-30T19:26:53Z")
> [@Shodan](#): > > 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. Two points: 1. Most laissez-faire conservatives I’ve encountered are opposed to environmental regulations of any sort. Or am I just mistaken, and those are all just corrupt crony-capitalists? 2. I actually quite like the pollution credits idea, as you’re quite correct - it can bring free market efficiency to bear on the problem. And while the incentive structure it produces is not unlike that of a free market, make no mistake, this is government intervention in the economy through and through. While you may not envisage a market totally free from govt intervention, that _is_ the subject of discussion as per the OP. > [@](#): > > 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. Since when does the government have a monopoly on education, and where did I suggest that it should? And your point about demand completely misses the point of the problem posed by externalities. Of course there would be a strong demand for education in a laissez-faire system. That goes without saying. The point is that the demand would not be as high as would be expected given the total benefits it produces - just as manufacturers will pollute more than they otherwise would if they aren’t forced by govt coercion to bear the costs of that pollution, people will purchase less education than they otherwise would if they only receive a portion of the total benefit in which that education results. The point isn’t that education in a laissez-faire system will be a disaster or anything, just that the production levels will be suboptimal because of the structure of the system. > [@](#): > > 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. But again this misses the point. Of course there would be roads. The question is what sort of transportation infrastructure would develop. Now, I’m not totally convinced that roads actually have positive externalities, but there’s a case to be made that they do, along with other sorts of physical infrastructure - sewers and whatnot. Now of course, even if you grant my point about positive externalities, you might question whether the current sort of government intervention is ideal. I should expect that a strong advocate of laissez-faire who accepts my points thus far would prefer broad demand-side subsidies to education or public health (vouchers and the like) to retain free market incentive structures, and I’d certainly be willing to discuss the relative merits of that sort of intervention vs more traditional forms of intervention. My basic argument, however, has simply been that free markets absent government intervention are inherently distorting because of externalized costs and benefits, and hence true laissez-faire capitalism is miguided at best, even completely ignoring the potential worries of excessivly unequal distribution that have been batted back and forth for most of this thread. ---
**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, 8:45pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/147 "2004-10-30T20:45:25Z")
**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._ “Tend to correct” is pretty vague and feeble. I do recognize that markets have self-correcting tendencies, but they are not always speedy and effective enough to be tolerable. _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._ But that’s not a demonstrable fact, that’s just a statement of faith. It seems to me at least equally likely that there’s **some** level of market regulation that makes the market more efficient than no regulation at all. _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._ Oh, okay then, we’re more or less in agreement. Too much regulation makes markets needlessly inefficient, and so does too little regulation. We doubtless disagree on what the “just right” amount of regulation is, but at least we concur that it’s there. **Shodan:** _There is no mechanism that works better than the free market in correcting excesses._ Another statement of faith, and in many cases, a very unconvincing one. Considering factors like pollution or workplace safety, for example, I’ve no doubt that the market would **eventually** self-correct to eliminate irresponsible actors after enough communities had been poisoned or enough workers had been killed. But the level of cost required for self-correction to kick in would generally not be considered tolerable. In such cases, excesses are actually better corrected by preventive regulation than by post-catastrophe self-correction. (Even pollution credits, which are rightly praised as a way to include market incentives in anti-pollution measures, are fundamentally based on regulation.) **Sam Stone:** _What we are arguing is not the perfection of Capitalism, but whether it is, on balance, a better system than government regulation of economic affairs._ Is anybody here really arguing for **total** government regulation of economic affairs? As I understand it, most of us non-market-fundamentalists here are simply saying that markets need **some** amount of regulation in order to keep them working efficiently and to keep their societies reasonably stable. I don’t think that position qualifies as “anti-capitalist”. ---
**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, 9:09pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/148 "2004-10-30T21:09:37Z")
> [@Shalmanese](#): > > Thats bullshit, no competent economist would dare stand up and make such a statement. what an object **should** cost is the marginal utility that object imparts upon a rational agent. That is, if that money could have been spent in a different way to make the spender “happier”, then that money is being spent inefficiently. I’m curious as to what school of economic thought ever said that price _should_ be anything. If it should be, as you say, equal to marginal utility, how do you deal with the fact that different people value things differently? If I have more use for something than you, should I pay more for it? If price is lower than my marginal utility, when I buy the item am I exploiting the producer? I was always under the impression that for a transaction to take place, price would have to be lower than the consumer’s marginal utility and higher than the producer’s marginal utility. Every economics professor I ever had said that economics made no value judgements as to what price should be, and that any declarations about what prices should be were individual opinions that had nothing to do with economics. ---
**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, 10:02pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/149 "2004-10-30T22:02:18Z")
> [@Kimstu](#): > > Is anybody here really arguing for **total** government regulation of economic affairs? As I understand it, most of us non-market-fundamentalists here are simply saying that markets need **some** amount of regulation in order to keep them working efficiently and to keep their societies reasonably stable. I don’t think that position qualifies as “anti-capitalist”. That’s what’s really at the crux of why this debate isn’t going to go anywhere. With all due respect to **XT** , this topic is just too big and amorphous to debate here. WRT market regulations, it’s realy necessary to debate each one individually-- weighing in on it’s own merits or lack thereof. ---
**Author:** ![Shalmanese](https://avatars.discourse-cdn.com/v4/letter/s/45deac/32.png) [@Shalmanese](https://boards.straightdope.com/u/Shalmanese)\ **Post date:** [October 31, 2004, 2:44am UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/150 "2004-10-31T02:44:49Z")
> [@Leonard](#): > > I’m curious as to what school of economic thought ever said that price _should_ be anything. If it should be, as you say, equal to marginal utility, how do you deal with the fact that different people value things differently? If I have more use for something than you, should I pay more for it? If price is lower than my marginal utility, when I buy the item am I exploiting the producer? > > I was always under the impression that for a transaction to take place, price would have to be lower than the consumer’s marginal utility and higher than the producer’s marginal utility. > > Every economics professor I ever had said that economics made no value judgements as to what price should be, and that any declarations about what prices should be were individual opinions that had nothing to do with economics. By doing this, you’ve removed all all prescritive value from economics and rendered it neutered as a means of evaluation. In other words, economics would have no way of judging whether any prospective system is “better” compared to any other economic system. A fine ideal if your working in humanities but not in a social science. Without **some** definition of price that is proscriptive, theres nothing to debate about free markets because every system must be equally as good. ---
**Author:** ![Leonard](https://avatars.discourse-cdn.com/v4/letter/l/a6a055/32.png) [@Leonard](https://boards.straightdope.com/u/Leonard)\ **Post date:** [October 31, 2004, 1:39pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/151 "2004-10-31T13:39:13Z")
> [@Shalmanese](#): > > By doing this, you’ve removed all all prescritive value from economics and rendered it neutered as a means of evaluation. In other words, economics would have no way of judging whether any prospective system is “better” compared to any other economic system. A fine ideal if your working in humanities but not in a social science. > > Without **some** definition of price that is proscriptive, theres nothing to debate about free markets because every system must be equally as good. In a way you’re right. Efficiency is pretty much the only way economics judges economic systems. If you want to judge it any further than that, you will have to use philosophy and morals. That’s fine. Just don’t say that philosophy or morality are economics. If price should equal marginal utility, whose marginal utility? (Also the other questions from the previous post.) There are ways other than analyzing price levels to judge economic systems, too. ---
**Author:** ![Leonard](https://avatars.discourse-cdn.com/v4/letter/l/a6a055/32.png) [@Leonard](https://boards.straightdope.com/u/Leonard)\ **Post date:** [October 31, 2004, 2:06pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/152 "2004-10-31T14:06:34Z")
One quick thing to add: I think it’s is much better to phrase statements about the morality of something without dragging price into it. For example: “Everyone should have adequate health care.” instead of “The price of health care should be…” ---
**Author:** ![Voodoochile](https://avatars.discourse-cdn.com/v4/letter/v/898d66/32.png) [@Voodoochile](https://boards.straightdope.com/u/Voodoochile)\ **Post date:** [October 31, 2004, 4:07pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/153 "2004-10-31T16:07:14Z")
> [@Kimstu](#): > > Recent economic research has begun to examine some of these issues beyond the naive level of “well-if-the-company’s-willing-to-pay-it-then-it-must-be-the-fair-market-price”: I would be very curious as to the breakdown of industry that these mangerial tactics occur in. In this study, they lumped them all together; I could find no breakdown as to industry. The US is a mixed economy; some industries are more free market than others. If, for example, managers/CEOs/stockholders of companies in the energy industry, auto industry, cable industry, insurance industry, defense industry or healthcare industries were included in that study, then it certainly cant be held up as an example of failures of market price, since markets have little or no effect on many of those industries. ---
**Author:** ![Kimstu](https://avatars.discourse-cdn.com/v4/letter/k/ecd19e/32.png) [@Kimstu](https://boards.straightdope.com/u/Kimstu)\ **Post date:** [October 31, 2004, 7:38pm UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/154 "2004-10-31T19:38:41Z")
**Vdc:** _I would be very curious as to the breakdown of industry that these mangerial tactics occur in. […] If, for example, managers/CEOs/stockholders of companies in the energy industry, auto industry, cable industry, insurance industry, defense industry or healthcare industries were included in that study, then it certainly cant be held up as an example of failures of market price, since markets have little or no effect on many of those industries._ Very interesting question! I’m sorry, I don’t know where to find information about executive compensation practices broken down by industry. If the energy, auto, insurance, defense, and healthcare industries are all pretty much non-competitive, isn’t that a pretty huge chunk of the US economy that is essentially a planned rather than a market economy? It reminds me of a book I read recently by John Kenneth Galbraith, _The New Industrial State_ in which he predicted (in 1967) that industrial economies were in the process of shifting from a free-market to a planned structure, due to the need of large vertically-integrated producers for stable production and distribution over long time intervals. (I figured that the information revolution and outsourcing and just-in-time inventory and so forth would have countered that trend in ways that Galbraith wasn’t fully aware of in 1967, but according to you it’s still pretty significant.) Gee whillikers. “Market socialist” economies in China, “planned capitalist” economies in the US—it’s really getting harder and harder to tell the pigs from the men these days, isn’t it? 😉 ---
**Author:** ![pervert](https://avatars.discourse-cdn.com/v4/letter/p/bbe5ce/32.png) [@pervert](https://boards.straightdope.com/u/pervert)\ **Post date:** [November 1, 2004, 12:36am UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/155 "2004-11-01T00:36:01Z")
Your post mentioned several other issues, but I really think it boils down to this last paragraph (good summation BTW). I am addressing it by itself for that reason. If I missed anything you feel needs addressing simply ask and I will try. > [@Kimstu](#): > > 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. Well, yes, there is indeed a reason to assume that they will be efficient. It is the idea that to many eyes any problem will seem shallow. The reason free markets are efficient is that economic decisions get made both in limited ways, and far more expansive ways than any other system of organizing an economy. Firstly, the cronyism you mentioned can only effect those who participate in it. It is not in and of itself a systematic problem with capitalism. This cannot be said for communism, for instance, where certain fundemental misunderstanding of the workings of productive enterprises is a requirement for participation. My point is that any particular problem of behavior will necessarily be limited to those who participate because those individuals do not have the power to affect anyone else’s property. Secondly, however, the free interaction of individuals is far more expansive than controlled economies because there are far more sets of rules involved. Imagine if you will the communist utopia. Not enforced by an armed uprising, but actually democratically responsive to all of the people. Every decision made to control the economy is a quick and accurate reflection of the true will of the people. Even in this case, the people can never be responsive enough to make their economy as efficient as the worst of the free markets. As people in this utopia vote, if they could, once a day, the people in a free market vote hundreds of millions of times a second. It is a simple matter of overwhelming decion making power. Even if the majority of these millions upon millions of decisions made in the free market are made for spurious or irrational reasons, the free market cannot help but be more efficient. When a serious problem occurs, millions of tiny sectors of the economy wall themselves off from it as fast as they can. When an opportunity arrises, millions of tine sectors of the economy rush to take advantage of it as fast as they can. Meanwhile only those sectors who can afford the risk of a new investment will rush in. And only those sectors who cannot afford the risk will abandon the problem. Every other sector of the economy may very well be uneffected. Our ridiculously efficient communist utopia has to wait days in order to take advantage of such events. And just to make matters worse, if our utopia votes incorrectly (sometimes opportunities don’t pan out, sometimes scandals are baseless) the entire economy suffers. What I am trying to say is that yes, ideed, the simple fact that a free economy is free means that it will be more efficient that one which is not. ---
**Author:** ![Kimstu](https://avatars.discourse-cdn.com/v4/letter/k/ecd19e/32.png) [@Kimstu](https://boards.straightdope.com/u/Kimstu)\ **Post date:** [November 1, 2004, 12:43am UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/156 "2004-11-01T00:43:54Z")
But your example only suggests that a free economy, even with all its inefficiencies and disruptions, is bound to be more efficient than a **totally controlled** economy, which I don’t think anybody’s disputing. What we’re talking about here is whether a completely free market must in fact be more efficient than a **partially** regulated one, and I think it’s clear that it ain’t necessarily so. Judicious regulation, as I pointed out above, on issues like pollution and workplace safety can prevent a whole lot of expensive mistakes. ---
**Author:** ![pervert](https://avatars.discourse-cdn.com/v4/letter/p/bbe5ce/32.png) [@pervert](https://boards.straightdope.com/u/pervert)\ **Post date:** [November 1, 2004, 1:21am UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/157 "2004-11-01T01:21:53Z")
> [@Kimstu](#): > > But your example only suggests that a free economy, even with all its inefficiencies and disruptions, is bound to be more efficient than a **totally controlled** economy, which I don’t think anybody’s disputing. > > What we’re talking about here is whether a completely free market must in fact be more efficient than a **partially** regulated one, and I think it’s clear that it ain’t necessarily so. No. My suggestion is that a free economy is more efficient than a controlled one. This is true if the economy in question is totally controlled or partially controlled. The difference as far as I have been able to tell, is that partially controlled economies can “leach”\* off of the portion of the economy which is not controlled. If you compare those portions which are controlled with those which are not, you will almost invariable find greater innovation without the controlls. > [@](#): > > Judicious regulation, as I pointed out above, on issues like pollution and workplace safety can prevent a whole lot of expensive mistakes. Yes, but they can also cause a whole lot of more expensive mistakes. Go and find out what sorts of businesses are being shut down because they cannot live up to the current level of workplace safety or pollution regulations. Mind you, I’m not talking about removing the penalties of actual damage. I’m just saying that many of our current regulatory systems amount to a policy of premption which is more intrusive thatn necessary IMHO to achieve the desired ends. I assume you are talking about this statement of yours. > [@](#): > > Considering factors like pollution or workplace safety, for example, I’ve no doubt that the market would eventually self-correct to eliminate irresponsible actors after enough communities had been poisoned or enough workers had been killed. But the level of cost required for self-correction to kick in would generally not be considered tolerable. In such cases, excesses are actually better corrected by preventive regulation than by post-catastrophe self-correction. (Even pollution credits, which are rightly praised as a way to include market incentives in anti-pollution measures, are fundamentally based on regulation.) The question, however, becomes this “How many bussinesses really are the sorts of ‘irresponsible actors’ you mention?” I realize that many of the more libveral persuasion would like to think that all bussinesses simply by virtue of being for profit are irresponsible actors. But this is simply not true. The vast majority of bussinesses are very concerned that they have a healthy and happy workforce. They are more productive that way. I agree that some can act irresponsibly, but to impose premtive policies on all of them in order to catch those few who are actually recklessly irresponsible, seems to me an inefficiency, not an imporvement. And this assumes that the policies are implemented ruthlessly honest. Any sorts of inefficiencies in the implementation of the policies will introduce new forces which may or may not change the equation. As you mention, it may be possible to develop a regulatory policy which when applied to the “irresponsible actors” is more efficient than without such a policy. Unfortunately, the preemptive nature of such policies means that they are applied much more broadly than to the “irresponsible actors”. \*Yep, I chose “leach” to be provocative. My own opinion, of course. 😉 ---
**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:** [November 1, 2004, 1:33am UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/158 "2004-11-01T01:33:42Z")
> [@pervert](#): > > No. My suggestion is that a free economy is more efficient than a controlled one. This is true if the economy in question is totally controlled or partially controlled. Then perhaps _you_ can explain to me why external costs and benefits don’t lead to structural inefficiencies in an unregulated market, since no one else has even directly addressed the subject. ---
**Author:** ![Shalmanese](https://avatars.discourse-cdn.com/v4/letter/s/45deac/32.png) [@Shalmanese](https://boards.straightdope.com/u/Shalmanese)\ **Post date:** [November 1, 2004, 1:37am UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/159 "2004-11-01T01:37:33Z")
**pervert** , Would you then care to address some of my questions presented and so far unanswered earlier in this thread? As far as I can tell, all the points I’ve raised are as structural to a free market as inefficiency is to a planned economy. Not all regulation is the same and its misleading to extrapolate the middle ground from two extreme points. You’ll have to back up your assertion about free markets always generating more innovation than non-free ones, it seems to be a fairly fundamental plank of the free-market case yet never adequately justified on anything but faith. Personally, I would say that anti-trust regulations designed to stop monopolies forming through mergers is specifically designed to promote innovation and works. btw: It’s “leech” ---
**Author:** ![pervert](https://avatars.discourse-cdn.com/v4/letter/p/bbe5ce/32.png) [@pervert](https://boards.straightdope.com/u/pervert)\ **Post date:** [November 1, 2004, 1:52am UTC](https://boards.straightdope.com/t/free-market-how-would-it-work/270976/160 "2004-11-01T01:52:44Z")
> [@Shalmanese](#): > > **pervert** , Would you then care to address some of my questions presented and so far unanswered earlier in this thread? As far as I can tell, all the points I’ve raised are as structural to a free market as inefficiency is to a planned economy. Certainly. Could you point out the most important one? > [@](#): > > Not all regulation is the same and its misleading to extrapolate the middle ground from two extreme points. OK, I can agree to this. I don’t think that is what I am doing, however. > [@](#): > > You’ll have to back up your assertion about free markets always generating more innovation than non-free ones, it seems to be a fairly fundamental plank of the free-market case yet never adequately justified on anything but faith. Well, I have seen it justified in many examples. The general trend to freerer markets world wide would seem to be a genearl demonstration. A comparison of things like the internet vs the early French experiment with popular computer networks. Heck, the phone early phone companies vs the AT&T comglomerate vs the recent breakups. > [@](#): > > Personally, I would say that anti-trust regulations designed to stop monopolies forming through mergers is specifically designed to promote innovation and works. Well, no, they were designed for political purposes, but I see you point. Can you recall 4 cases where a non government backed monopoly was broken up? > [@](#): > > btw: It’s “leech” Thank you. [Previous page](https://boards.straightdope.com/t/free-market-how-would-it-work/270976.md?page=7) [Next page](https://boards.straightdope.com/t/free-market-how-would-it-work/270976.md?page=9)