Liberty

Intellectuals vs. the rest of us

by Bob Weeks on May 7, 2012

At a recent educational meeting I attended, someone asked the question: Why doesn’t everyone believe what we (most of the people attending) believe: that private property and free exchange — capitalism, in other words — are superior to government intervention and control over the economy?

It’s question that I’ve asked at conferences I’ve attended. The most hopeful answer is ignorance. While that may seem a harsh word to use, ignorance is simply a “state of being uninformed.” That can be cured by education. This is the reason for this website. This is the reason why I and others testify in favor of free markets and against government intervention. It is the reason why John Todd gives out hundreds of copies of I, Pencil, purchased at his own expense.

But there is another explanation, and one that is less hopeful. There is an intellectual class in our society that benefits mightily from government. This class also believes that their cause is moral, that they are anointed, as Thomas Sowell explains in The vision of the anointed: self-congratulation as a basis for social policy: “What all these highly disparate crusades have in common is their moral exaltation of the anointed above others, who are to have their very different views nullified and superseded by the views of the anointed, imposed via the power of government.”

Murray N. Rothbard explains further the role of the intellectual class in the first chapter of For a New Liberty: The Libertarian Manifesto, titled “The Libertarian Heritage: The American Revolution and Classical Liberalism.” Since most intellectuals favor government over a market economy and work towards that end, what do the intellectuals get? “In exchange for spreading this message to the public, the new breed of intellectuals was rewarded with jobs and prestige as apologists for the New Order and as planners and regulators of the newly cartelized economy and society.”

There it is: Planners and regulators. We have plenty of these at all levels of government, and these are prime examples of the intellectual class. Is it any wonder that the locus of centralized planning in south-central Kansas — sustainable communities — is at a government university?

As Rothbard explains, intellectuals have cleverly altered the very meaning of words to suit their needs:

One of the ways that the new statist intellectuals did their work was to change the meaning of old labels, and therefore to manipulate in the minds of the public the emotional connotations attached to such labels. For example, the laissez-faire libertarians had long been known as “liberals,” and the purest and most militant of them as “radicals”; they had also been known as “progressives” because they were the ones in tune with industrial progress, the spread of liberty, and the rise in living standards of consumers. The new breed of statist academics and intellectuals appropriated to themselves the words “liberal” and “progressive,” and successfully managed to tar their laissez- faire opponents with the charge of being old-fashioned, “Neanderthal,” and “reactionary.” Even the name “conservative” was pinned on the classical liberals. And, as we have seen, the new statists were able to appropriate the concept of “reason” as well.

We see this at work in Wichita, where those who advocate for capitalism and free markets instead of government intervention are called, in the case of Wichita Mayor Carl Brewer and Wichita Eagle editorial writer Rhonda Holman, “naysayers.”

The sad realization is that as government has extended its reach into so many areas of our lives, to advocate for liberty instead of government intervention is to oppose many things that people have accepted as commonplace or inevitable. To advocate that free people should trade voluntarily with other free people — instead of forming a plan for them — is to be dismissed as “not serious.”

Rothbard further explains the role of intellectuals in promoting what they see as the goodness of expansive government:

Throughout the ages, the emperor has had a series of pseudo-clothes provided for him by the nation’s intellectual caste. In past centuries, the intellectuals informed the public that the State or its rulers were divine, or at least clothed in divine authority, and therefore what might look to the naive and untutored eye as despotism, mass murder, and theft on a grand scale was only the divine working its benign and mysterious ways in the body politic. In recent decades, as the divine sanction has worn a bit threadbare, the emperor’s “court intellectuals” have spun ever more sophisticated apologia: informing the public that what the government does is for the “common good” and the “public welfare,” that the process of taxation-and-spending works through the mysterious process of the “multiplier” to keep the economy on an even keel, and that, in any case, a wide variety of governmental “services” could not possibly be performed by citizens acting voluntarily on the market or in society. All of this the libertarian denies: he sees the various apologia as fraudulent means of obtaining public support for the State’s rule, and he insists that whatever services the government actually performs could be supplied far more efficiently and far more morally by private and cooperative enterprise.

The libertarian therefore considers one of his prime educational tasks is to spread the demystification and desanctification of the State among its hapless subjects. His task is to demonstrate repeatedly and in depth that not only the emperor but even the “democratic” State has no clothes; that all governments subsist by exploitive rule over the public; and that such rule is the reverse of objective necessity. He strives to show that the very existence of taxation and the State necessarily sets up a class division between the exploiting rulers and the exploited ruled. He seeks to show that the task of the court intellectuals who have always supported the State has ever been to weave mystification in order to induce the public to accept State rule, and that these intellectuals obtain, in return, a share in the power and pelf extracted by the rulers from their deluded subjects.

And so the alliance between state and intellectual is formed. The intellectuals are usually rewarded quite handsomely by the state for their subservience, writes Rothbard:

The alliance is based on a quid pro quo: on the one hand, the intellectuals spread among the masses the idea that the State and its rulers are wise, good, sometimes divine, and at the very least inevitable and better than any conceivable alternatives. In return for this panoply of ideology, the State incorporates the intellectuals as part of the ruling elite, granting them power, status, prestige, and material security. Furthermore, intellectuals are needed to staff the bureaucracy and to “plan” the economy and society.

The “material security,” measured in dollars, can be pretty good, as shown by these examples: The Wichita city manager is paid $185,000, the Sedgwick county manager is paid $175,095, and the superintendent of the Wichita school district is paid $224,910.

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Myth: Markets debase culture and art

by Guest Author on May 7, 2012

When thinking about the difference between government action and action taken by free people trading voluntarily in markets, we find that many myths abound. Tom G. Palmer, who is Vice President for International Programs at the Atlas Economic Research Foundation, General Director of the Atlas Global Initiative for Free Trade, Peace, and Prosperity, a Senior Fellow at the Cato Institute, and Director of Cato University, has written an important paper that confronts these myths about markets. The fifteenth myth — Markets Debase Culture and Art — and Palmer’s refutation is below. The complete series of myths and responses is at Twenty Myths about Markets.

Palmer is editor of the recent book The Morality of Capitalism. He will be in Overland Park and Wichita in May speaking on the moral case for capitalism. For more information and to register for these events see The Morality of Capitalism. An eleven minute podcast of Palmer speaking on this topic is at The Morality of Capitalism.

Myth: Markets Debase Culture and Art

Myth: Art and culture are responses to the higher elements of the human soul and, as such, cannot be bought and sold like tomatoes or shirt buttons. Leaving art to the market is like leaving religion to the market, a betrayal of the inherent dignity of art, as of religion. Moreover, as art and culture are opened more and more to competition on international markets, the result is their debasement, as traditional forms are abandoned in the pursuit of the almighty dollar or euro.

Tom G. Palmer: Most art has been and is produced for the market. Indeed, the history of art is largely the history of innovation through the market in response to new technologies, new philosophies, new tastes, and new forms of spirituality. Art, culture, and the market have been intimately connected for many centuries. Musicians charge fees for people to attend their concerts, just as vegetable mongers charge for tomatoes or tailors charge to replace buttons on suits. In fact, the creation of wider markets for music, film, and other forms of art by the creation of records, cassettes, CDs, DVDs, and now iTunes and mp3 files allows more and more people to be exposed to more and more varied art, and for artists to create more artistic experiences, to create more hybrid forms of art, and to earn more income. Unsurprisingly, most of the art produced in any given year won’t stand the test of time; that creates a false perspective on the part of those who condemn contemporary art as “trashy,” in comparison to the great works of the past; what they are comparing are the best works winnowed out from hundreds of years of production to the mass of works produced in the past year. Had they included all of the works that did not stand the test of time and were not remembered, the comparison would probably look quite different.

What accounts for the survival of the best is precisely the competitive process of markets for art. Comparing the entirety of contemporary artistic production with the very best of the best from past centuries is not the only error people make when evaluating markets for art. Another error common to observers from wealthy societies who visit poor societies is the confusion of the poverty of poor societies with their cultures. When wealthy visitors see people in countries that are poor-but-growing-economically using cell phones and flipping open laptops, they complain that their visit is not as “authentic” as the last one. As people become richer through market interactions made possible by increasing liberalization or globalization, such as the introduction of cell telephony, antiglobalization activists from rich countries complain that the poor are being “robbed” of their culture. But why equate culture with poverty? The Japanese went from poverty to wealth and it would be hard to argue that they are any less Japanese as a result. In fact, their greater wealth has made possible the spread of awareness of Japanese culture around the world. In India, as incomes are rising, the fashion industry is responding by turning to traditional forms of attire, such as the sari, and adapting, updating, and applying to it aesthetic criteria of beauty and form. The very small country of Iceland has managed to maintain a high literary culture and their own theater and movie industry because per capita incomes are quite high, allowing them to dedicate their wealth to perpetuating and developing their culture.

Finally, although religious belief is not “for sale,” free societies do leave religion to the same principles — equal rights and freedom of choice — as those at the foundation of the free market. Churches, mosques, synagogues, and temples compete with each other for adherents and for support. Unsurprisingly, those European countries that provide official state support of churches tend to have very low church participation, whereas countries without state support of religion tend to have higher levels of church participation. The reason is not so hard to understand: churches that have to compete for membership and support have to provide services — sacramental, spiritual, and communal — to members, and that greater attention to the needs of the membership tends to create more religiosity and participation. Indeed, that’s why the official established state church of Sweden lobbied to be disestablished in the year 2000; as an unresponsive part of the state bureaucracy, the church was losing connection with its members and potential members and was, in effect, dying.

There is no contradiction between the market and art and culture. Market exchange is not the same as artistic experience or cultural enrichment, but it is a helpful vehicle for advancing both.

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When thinking about the difference between government action and action taken by free people trading voluntarily in markets, we find that many myths abound. Tom G. Palmer, who is Vice President for International Programs at the Atlas Economic Research Foundation, General Director of the Atlas Global Initiative for Free Trade, Peace, and Prosperity, a Senior Fellow at the Cato Institute, and Director of Cato University, has written an important paper that confronts these myths about markets. The fourteenth myth — Markets Rest on the Principle of the Survival of the Fittest — and Palmer’s refutation is below. The complete series of myths and responses is at Twenty Myths about Markets.

Palmer is editor of the recent book The Morality of Capitalism. He will be in Overland Park and Wichita in May speaking on the moral case for capitalism. For more information and to register for these events see The Morality of Capitalism. An eleven minute podcast of Palmer speaking on this topic is at The Morality of Capitalism.

Myth: Markets Rest on the Principle of the Survival of the Fittest

Myth: Just like the law of the jungle, red in tooth and claw, the law of the market means survival of the fittest. Those who cannot produce to market standards fall by the wayside and are trampled underfoot.

Tom G. Palmer: Invocations of evolutionary principles such as “survival of the fittest” in the study of living systems and in the study of human social interaction lead to confusion unless they identify what it is in each case that survives. In the case of biology, it is the individual animal and its ability to reproduce itself. A rabbit that is eaten by a cat because it’s too slow to escape isn’t going to have any more offspring. The fastest rabbits will be the ones to reproduce. When applied to social evolution, however, the unit of survival is quite different; it’s not the individual human being, but the form of social interaction, such as a custom, an institution, or a firm, that is “selected” in the evolutionary struggle. When a business firm goes out of business, it “dies,” that is to say, that particular form of social cooperation “dies,” but that certainly doesn’t mean that the human beings who made up the firm — as investors, owners, managers, employees, and so on — die, as well. A less efficient form of cooperation is replaced by a more efficient form. Market competition is decidedly unlike the competition of the jungle. In the jungle animals compete to eat each other, or to displace each other. In the market, entrepreneurs and firms compete with each other for the right to cooperate with consumers and with other entrepreneurs and firms. Market competition is not competition for the opportunity to live; it is competition for the opportunity to cooperate.

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When thinking about the difference between government action and action taken by free people trading voluntarily in markets, we find that many myths abound. Tom G. Palmer has written an important paper that confronts these myths about markets. The thirteenth myth — Markets Can Not Meet Human Needs, Such as Health, Housing, Education, and Food — and Palmer’s refutation is below. The complete series of myths and responses is at Twenty Myths about Markets.

Palmer is editor of the recent book The Morality of Capitalism. He will be in Overland Park and Wichita in May speaking on the moral case for capitalism. For more information and to register for these events see The Morality of Capitalism. An eleven minute podcast of Palmer speaking on this topic is at The Morality of Capitalism.

Myth: Markets Can Not Meet Human Needs, Such as Health, Housing, Education, and
Food

Myth: Goods should be distributed according to principles appropriate to their nature. Markets distribute goods according to ability to pay, but health, housing, education, food, and other basic human needs, precisely because they are needs, should be distributed according to need, not ability to pay.

Tom G. Palmer: If markets do a better job of meeting human needs than other principles, that is, if more people enjoy higher standards of living under markets than under socialism, it seems that the allocation mechanism under markets does a better job of meeting the criterion of need, as well. As noted above, the incomes of the poorest tend to rise rapidly with the degree of market freedom, meaning that the poor have more resources with which to satisfy their needs. (Naturally, not all needs are directly related to income; true friendship and love certainly are not. But there is no reason to think that those are more “equitably” distributed by coercive mechanisms, either, or even that they can be distributed by such mechanisms.)

Moreover, while assertions of “need” tend to be rather rubbery claims, as are assertions of “ability,” willingness to pay is easier to measure. When people bid with their own money for goods and services, they are telling us how much they value those goods and services relative to other goods and services. Food, certainly a more basic need than education or health care, is provided quite effectively through markets. In fact, in those countries where private property was abolished and state allocation substituted for market allocation, the results were famine and even cannibalism. Markets meet human needs for most goods, including those that respond to basic human needs, better than do other mechanisms.

Satisfaction of needs requires the use of scarce resources, meaning that choices have to be made about their allocation. Where markets are not allowed to operate, other systems and criteria for rationing scarce resources are used, such as bureaucratic allocation, political pull, membership in a ruling party, relationship to the president or the main holders of power, or bribery and other forms of corruption. It is hardly obvious that such criteria are better than the criteria evolved by markets, nor that they generate more equality; the experience is rather the opposite.

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When thinking about the difference between government action and action taken by free people trading voluntarily in markets, we find that many myths abound. Tom G. Palmer has written an important paper that confronts these myths about markets. The twelfth myth — Markets Lead to More Inequality than Non-Market Processes — and Palmer’s refutation is below. The complete series of myths and responses is at Twenty Myths about Markets.

Palmer is editor of the recent book The Morality of Capitalism. He will be in Overland Park and Wichita in May speaking on the moral case for capitalism. For more information and to register for these events see The Morality of Capitalism. An eleven minute podcast of Palmer speaking on this topic is at The Morality of Capitalism.

Myth: Markets Lead to More Inequality than Non-Market Processes

Myth: By definition, markets reward ability to satisfy consumer preferences and as abilities differ, so incomes will differ. Moreover, by definition, socialism is a state of equality, so every step toward socialism is a step toward equality.

Tom G. Palmer: If we want to understand the relationships between policies and outcomes, it should be kept in mind that property is a legal concept; wealth is an economic concept. The two are often confused, but they should be kept distinct. Market processes regularly redistribute wealth on a massive scale. In contrast, unwilling redistribution of property (when undertaken by individual citizens, it’s known as “theft”) is prohibited under the rules that govern free markets, which require that property be well defined and legally secure. Markets can redistribute wealth, even when property titles remain in the same hands. Every time the value of an asset (in which an owner has a property right) changes, the wealth of the asset owner changes. An asset that was worth 600 Euros yesterday may today be worth only 400 Euros. That’s a redistribution of 200 Euros of wealth through the market, although there has been no redistribution of property. So markets regularly redistribute wealth and in the process give owners of assets incentives to maximize their value or to shift their assets to those who will. That regular redistribution, based on incentives to maximize total value, represents transfers of wealth on a scale unthinkable for most politicians. In contrast, while market processes redistribute wealth, political processes redistribute property, by taking it from some and giving it to others; in the process, by making property less secure, such redistribution tends to make property in general less valuable, that is, to destroy wealth. The more unpredictable the redistribution, the greater the loss of wealth caused by the threat of redistribution of property.

Equality is a characteristic that can be realized along a number of different dimensions, but generally not across all. For example, people can all be equal before the law, but if that is the case, it is unlikely that they will have exactly equal influence over politics, for some who exercise their equal rights to freedom of speech will be more eloquent or energetic than others, and thus more influential. Similarly, equal rights to offer goods and services on free markets may not lead to exactly equal incomes, for some may work harder or longer (because they prefer income to leisure) than others, or have special skills for which others will pay extra. On the flip side, the attempt to achieve through coercion equality of influence or equality of incomes will entail that some exercise more authority or political power than others, that is, the power necessary to bring about such outcomes. In order to bring about a particular pattern of outcomes, someone or some group must have the “God’s Eye” view of outcomes necessary to redistribute, to see a lack here and a surplus there and thus to take from here and move to there. As powers to create equal outcomes are concentrated in the hands of those entrusted with them, as was the case in the officially egalitarian Soviet Union, those with unequal political and legal powers find themselves tempted to use those powers to attain unequal incomes or access to resources. Both logic and experience show that conscious attempts to attain equal or “fair” incomes, or some other pattern other than what the spontaneous order of the market generates, are generally self-defeating, for the simple reason that those who hold the power to redistribute property use it to benefit themselves, thus converting inequality of political power into other sorts of inequality, whether honors, wealth, or something else. Such was certainly the experience of the officially communist nations and such is the path currently being taken by other nations, such as Venezuela, in which total power is being accumulated in the hands of one man, Hugo Chavez, who demands such massively unequal power, ostensibly in order to create equality of wealth among citizens.

According to the data in the 2006 Economic Freedom of the World Report, reliance on free markets is weakly correlated to income inequality (from the least free to the most free economies the world over, divided into quartiles, the percentage of income received by the poorest ten percent varies from an average of 2.2% to an average of 2.5%), but it is very strongly correlated to the levels of income of the poorest ten percent (from the least free to the most free economies the world over, divided into quartiles, the average levels of income received by the poorest ten percent are $826, $1,186, $2,322, and $6,519). Greater reliance on markets seems to have little impact on income distributions, but it does substantially raise the incomes of the poor and it is likely that many of the poor would certainly consider that a good thing.

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When thinking about the difference between government action and action taken by free people trading voluntarily in markets, we find that many myths abound. Tom G. Palmer has written an important paper that confronts these myths about markets. The eleventh myth — Too Much Reliance on Markets Is As Silly as Too Much Reliance on Socialism: the Best is the Mixed Economy — and Palmer’s refutation is below. The complete series of myths and responses is at Twenty Myths about Markets.

Palmer is editor of the recent book The Morality of Capitalism. He will be in Overland Park and Wichita in May speaking on the moral case for capitalism. For more information and to register for these events see The Morality of Capitalism. An eleven minute podcast of Palmer speaking on this topic is at The Morality of Capitalism.

Myth: Too Much Reliance on Markets Is As Silly as Too Much Reliance on Socialism: the
Best is the Mixed Economy

Myth: Most people understand that it’s unwise to put all your eggs in one basket. Prudent investors diversify their portfolios and it’s just as reasonable to have a diversified “policy portfolio,” as well, meaning a mix of socialism and markets.

Tom G. Palmer: Prudent investors who don’t have inside information do indeed diversify their portfolios against risk. If one stock goes down, another may go up, thus evening out the loss with a gain. Over the long run, a properly diversified portfolio will grow. But policies aren’t like that. Some have been demonstrated time and time gain to fail, while others have been demonstrated to succeed. It would make no sense to have a “diversified investment portfolio” made up of stocks in firms that are known to be failing and stocks in firms that are known to be succeeding; the reason for diversification is that one doesn’t have any special knowledge of which firms are more likely to be profitable or unprofitable.

Studies of decades of economic data carried out annually by the Fraser Institute of Canada and a world wide network of research institutes have shown consistently that greater reliance on market forces leads to higher per capita incomes, faster economic growth, lower unemployment, longer life spans, lower infant mortality, falling rates of child labor, greater access to clean water, health care, and other amenities of modern life, including cleaner environments, and improved governance, such as lower rates of official corruption and more democratic accountability. Free markets generate good results.

Moreover, there is no “well balanced” middle of the road. State interventions into the market typically lead to distortions and even crises, which then are used as excuses for yet more interventions, thus driving policy one direction or another. For example, a “policy portfolio” that included imprudent monetary policy, which increases the supply of money faster than the economy is growing, will lead to rising prices. History has shown repeatedly that politicians tend to respond, not by blaming their own imprudent policies, but by blaming an “overheated economy” or “unpatriotic speculators” and imposing controls on prices. When prices are not allowed to be corrected by supply and demand (in this case, the increased supply of money, which tends to cause the price of money, as expressed in terms of commodities, to fall), the result is shortages of goods and services, as more people seek to buy limited supplies of goods at the below-market price than producers are willing to supply at that price. In addition, the lack of free markets leads people to shift to black markets, under-the-table-bribes of officials, and other departures from the rule of law. The resulting mixture of shortage and corruption then typically induces yet greater tendencies toward authoritarian assertions of power. The effect of creating a “policy portfolio” that includes such proven bad policies is to undermine the economy, to create corruption, and even to undermine constitutional democracy.

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In a short video, Nigel Ashford of Institute for Humane Studies explains the tenets of classical liberalism. Not to be confused with modern American liberalism or liberal Republicans, classical liberalism places highest value on liberty and the individual. Modern American liberals, or progressives as they often prefer to be called, may value some of these principles, but most, such as free markets and limited government — and I would add individualism and toleration — are held in disdain by them.

Here are the principles of classical liberalism that Ashford identifies:

Liberty is the primary political value. “When deciding what to do politically — what should the government do — classical liberals have one clear standard: Does this increase, or does it reduce the freedom of the individual?”

Individualism. “The individual is more important than the collective.”

Skepticism about power. “Government, for example, often claims ‘we’re forcing you to do X because it’s in your own interests to do so.’ Whereas very often, when people with power do that, it’s really because it’s good for themselves. Classical liberals believe that the individual is the best judge of their own interests.”

Rule of law.

Civil society. Classical liberals believe that problems can be dealt with best by voluntary associations and action.

Spontaneous order. “Many people seem to assume that order requires some institution, some body, to manipulate and organize things. Classical liberals don’t believe that. They believe that order can arise spontaneously. People through their voluntary interaction create the rules by which people can live by.”

Free markets. “Economic exchange should be left to voluntary activity between individuals. … We need private property to be able to do that. … History show us that leaving things to free markets rather than government planning or organization, increases prosperity, reduces poverty, increases jobs, and provides good that people want to buy.”

Toleration. “Toleration is the belief that one should not interfere with things on which one disapproves. … It’s a question of having certain moral principles (“I think this action is wrong”), but I will not try and force my opinions — for example through government — to stop the things I disapprove of.”

Peace. Through free movement of capital, labor, goods, services, and ideas, we can have a world based on peace rather than conflict and war.

Limited government. “There are very few things the government should do. The goal of government is simply to protect life, liberty, and property. Anything beyond that is not justifiable.”

This video is available on YouTube through LearnLiberty.org, a site which has many other informative videos. Besides this video, other resources on classical liberalism include What Is Classical Liberalism? by Ralph Raico, What Is Classical Liberalism? by John C. Goodman, Christianity, Classical Liberalism are Liberty’s Foundations by Leonard P. Liggio, What is Libertarian? at the Institute for Humane Studies, Why I, Too, Am Not a Conservative: The Normative Vision of Classical Liberalism (review of James M. Buchanan book by William A. Niskanen), Myths of Individualism by Tom G. Palmer, and Palmer’s book Realizing Freedom: Libertarian Theory, History, and Practice.

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When thinking about the difference between government action and action taken by free people trading voluntarily in markets, we find that many myths abound. Tom G. Palmer has written an important paper that confronts these myths about markets. The tenth myth — Markets Lead to Disastrous Economic Cycles, Such as the Great Depression — and Palmer’s refutation is below. The complete series of myths and responses is at Twenty Myths about Markets.

Palmer is editor of the recent book The Morality of Capitalism. He will be in Overland Park and Wichita in May speaking on the moral case for capitalism. For more information and to register for these events see The Morality of Capitalism. An eleven minute podcast of Palmer speaking on this topic is at The Morality of Capitalism.

Myth: Markets Lead to Disastrous Economic Cycles, Such as the Great Depression

Myth: Reliance on market forces leads to cycles of “boom and bust,” as investor overconfidence feeds on itself, leading to massive booms in investment that are inevitably followed by contractions of production, unemployment, and a generally worsening economic condition.

Tom G. Palmer: Economic cycles of “boom and bust” are sometimes blamed on reliance on markets. The evidence, however, is that generalized overproduction is not a feature of markets; when more goods and services are produced, prices adjust and the result is general affluence, not a “bust.” When this or that industry expands beyond the ability of the market to sustain profitability, a process of self-correction sets in and profit signals lead resources to be redirected to other fields of activity. There is no reason inherent in markets for such correction to apply to all industries; indeed, it is self-contradictory (for if investment is being taken away from all and redirected to all, then it’s not being taken away from all in the first place).

Nonetheless, prolonged periods of general unemployment are possible when governments distort price systems through foolish manipulation of monetary systems, a policy error that is often combined with subsidies to industries that should be contracting and wage and price controls that keep the market from adjusting, thus prolonging the unemployment. Such was the case of the Great Depression that lasted from 1929 to the end of World War II, which economists (such as Nobel Prize winner Milton Friedman) showed was caused by a massive and sudden contraction in the money supply by the U.S. Federal Reserve system, which was pursuing politically set goals. The general contraction was then deepened by the rise in protectionism, which extended the suffering worldwide, and prolonged greatly by such programs as the National Recovery Act, programs to keep farm prices high (by destroying huge quantities of agricultural products and restricting supply), and other “New Deal” programs that were aimed at keeping market forces from correcting the disastrous effects of the government’s policy errors.

More recent crashes, such as the Asian financial crisis of 1997, have been caused by imprudent monetary and exchange rate policies that distorted the signals to investors. Market forces corrected the policy failures of governments, but the process was not without hardship; the cause of the hardship was not the medicine that cured the disease, but the bad monetary and exchange rate policies of governments that caused it in the first place.

With the adoption of more prudent monetary policies by governmental monetary authorities, such cycles have tended to even out. When combined with greater reliance on market adjustment processes, the result has been a reduction in the frequency and severity of economic cycles and long-term and sustained improvement in those countries that have followed policies of freedom of trade, budgetary restraint, and the rule of law.

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When thinking about the difference between government action and action taken by free people trading voluntarily in markets, we find that many myths abound. Tom G. Palmer has written an important paper that confronts these myths about markets. The ninth myth — Markets Don’t Work in Developing Countries — and Palmer’s refutation is below. The complete series of myths and responses is at Twenty Myths about Markets.

Palmer is editor of the recent book The Morality of Capitalism. He will be in Overland Park and Wichita in May speaking on the moral case for capitalism. For more information and to register for these events see The Morality of Capitalism. An eleven minute podcast of Palmer speaking on this topic is at The Morality of Capitalism.

Myth: Markets Don’t Work in Developing Countries

Myth:Markets work well in countries with well developed infrastructures and legal systems, but in their absence developing countries simply cannot afford recourse to markets. In such cases, state direction is necessary, at least until a highly developed infrastructure and legal system is developed that could allow room for markets to function.

Tom G. Palmer: In general, infrastructure development is a feature of the wealth accumulated through markets, not a condition for markets to exist, and the failure of a legal system is a reason why markets are underdeveloped, but that failure is a powerful reason to reform the legal system so it could provide the foundation for the development of markets, not to postpone legal reform and market development. The only way to achieve the wealth of developed countries is to create the legal and institutional foundations for markets so that entrepreneurs, consumers, investors, and workers can freely cooperate to create wealth.

All currently wealthy countries were once very poor, some within living memory. What needs explanation is not poverty, which is the natural state of mankind, but wealth. Wealth has to be created and the best way to ensure that wealth is created is to generate the incentives for people to do so. No system better than the free market, based on well defined and legally secure property rights and legal institutions to facilitate exchange, has ever been discovered for generating incentives for wealth creation. There is one path out of poverty, and that is the path of wealth creation through the free market. The term “developing nation” is frequently misapplied when it is applied to nations whose governments have rejected markets in favor of central planning, state ownership, mercantilism, protectionism, and special privileges. Such nations are not, in fact, developing at all. The nations that are developing, whether starting from relatively wealthy or relatively impoverished positions, are those that have created legal institutions of property and contract, freed markets, and limited the powers, the budget, and the reach of the state power.

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Walter Williams on government in a free society

May 1, 2012

Economist Walter E. Williams spoke on the legitimate role of government in a free society, touching on the role of government as defined in the Constitution, the benefits of capitalism and private property, and the recent attacks on individual freedom and limited government.

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Myth: The more complex a social order is, the less it can rely on markets and the more it needs government direction

April 30, 2012

As society becomes more complex, reliance on voluntary market exchange becomes more — not less — important. A complex social order requires the coordination of more information than any mind or group of minds could master.

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Myth: Markets don’t work (or are inefficient) when there are negative or positive externalities

April 29, 2012

Negative externalities such as air and water pollution are not a sign of market failure, but of government’s failure to define and defend the property rights on which markets rest.

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Myth: Markets cannot possibly produce public (collective) goods

April 28, 2012

The public goods justification for the state is one of the most commonly misapplied of economic arguments. But many goods that are allegedly impossible to provide through markets have been, or are at present, provided through market mechanisms — from lighthouses to education to policing to transportation, which suggests that the common invocation of alleged publicness is unjustified, or at least overstated. Then, virtually every argument alleging the impossibility of efficient production of public goods through the market applies at least equally strongly– and in many cases much more strongly –to the likelihood that the state will produce public goods.

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Myth: Markets only work when an infinite number of people with perfect information trade undifferentiated commodities

April 27, 2012

Abstract models of economic interaction can be useful, but when normatively loaded terms such as “perfect” are added to theoretical abstractions, a great deal of harm can be done. For the state to be the agency that would move markets to such “perfection,” we would expect that it, too, would be the product of “perfect” democratic policies, in which infinite numbers of voters and candidates have no individual impact on policies, all policies are homogenous, and information about the costs and benefits of policies is costless. That is manifestly never the case.

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Myth: Markets depend on perfect information, requiring government regulation to make information available

April 26, 2012

Markets do not require for their operation perfect information, any more than democracies do. Significantly, politicians and voters have less incentive to acquire the right amount of information than do market participants, because they aren’t spending their own money.

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Myth: Reliance on markets leads to monopoly

April 25, 2012

While many believe that free markets tend to produce monopolies, it is actually government that is the grantor and protector of monopoly rights. Market competition works against monopoly power.

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Myth: Markets are immoral or amoral

April 23, 2012

Are markets moral or immoral? Tom G. Palmer responds to the myth that there is no morality in market exchange.

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For Koch critics, facts aren’t part of the equation

April 2, 2012

A newspaper editorial begins with “What is it, or why is it, that the name Koch, particularly here in Lawrence and Kansas, seems to trigger such angry, passionate and negative responses from a certain segment of the community, particularly among some at Kansas University?” It’s a good question.

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If government ordered your lunch, would you get what you want?

March 23, 2012

Speaking on government making decisions for us, Antony Davies concludes “Even if it’s benevolent, it fails because it lacks the necessary information to make those decision correctly.”

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‘Occupy Koch town’ ignores the facts

February 17, 2012

As director of corporate communication for Koch industries, I’ve read and heard much about this company and its shareholders that is dishonest, distorted and derogatory. And while we continue to try to bat down the falsehoods, as quickly as we quash one, another rears its ugly head. As Winston Churchill once said, “A lie gets halfway around the world before the truth has a chance to get its pants on,” writes Melissa Cohlmia.

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On Charles and David Koch, Obama channels Nixon

February 1, 2012

“Richard Nixon maintained an ‘enemies list’ that singled out private citizens for investigation and abuse by agencies of government, including the Internal Revenue Service. When that was revealed, the press and public were outraged. That conduct will forever remain one of the indelible stains on Nixon’s presidency and legacy.” Now President Barack Obama is doing the same.

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Modern-day students and attitudes towards government

January 31, 2012

Many modern-day college students seem to think that government entitlements should be the source of the things they want.

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Classical liberalism values liberty, the individual, and civil society

December 19, 2011

In a short video, Nigel Ashford of Institute for Humane Studies explains the tenets of classical liberalism.

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The creeping expansion of government power

December 18, 2011

Government increases its scope and power in sometimes small increments, writes John D’Aloia Jr.

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Sustainable planning: The agenda and details

December 16, 2011

A paper written by Sedgwick County Commissioner Richard Ranzau explains the dangers behind the sustainable planning movement.

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Libertarianism site launched

November 10, 2011

Libertarianism.org provides a resource covering liberty and its benefits.

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Intellectuals against the people and their freedoms

October 13, 2011

Why are so many opposed to private property and free exchange — capitalism, in other words — in favor of large-scale government interventionism? Lack of knowledge, or ignorance, is one answer, but there is another.

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Kansas and Wichita quick takes: Friday September 9, 2011

September 9, 2011

Today: A citizen call to action; Troubles with Kansas City tax increment financing; Effects of stimulus on hiring; Kansas education summit; Why should conservatives like libertarian ideas?

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Walter Williams: Government must stick to its limited and legitimate role

September 8, 2011

Economist Walter E. Williams spoke on the legitimate role of government in a free society, touching on the role of government as defined in the Constitution, the benefits of capitalism and private property, and the recent attacks on individual freedom and limited government.

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Guitar makers and players targeted by onerous laws

August 26, 2011

Today the Wall Street Journal reports again on startling examples of overcriminalization, with federal authorities conducting raids on businesses based on aggressive enforcement of broad and vague laws.

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‘Honest services’ law expansion sought

August 19, 2011

While the U.S. Supreme Court has attempted to limit the application of vague “honest services” statutes, the Obama Administration is working to restore what the Wall Street Journal describes as “essentially unlimited prosecutorial discretion to bring white-collar cases.”

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Lies of liberal progressives, Sunday edition

August 15, 2011

A recent television talk show provided viewers a lesson on how the political left lies and distorts in order to score political points against what it sees as easy targets. This activity is necessary to prop up the system of modern American liberalism, which is based on the lie that human freedom and liberty is enhanced by expanding government beyond what is minimally necessary to secure our true rights and freedoms.

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Criminal laws proliferate, at a cost to freedom

August 10, 2011

The proliferation of criminal laws and regulations with criminal penalties mean that the freedoms of Americans are increasingly at risk as prosecutors take advantage of expanded authority and reach of the federal justice system. Sometimes prosecutors don’t even need to show criminal intent in order to gain a conviction.

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Kansas and Wichita quick takes: Monday August 1, 2011

August 1, 2011

Today: Debt deal seen as victory for smaller government; Wichita city council; Sedgwick County Commission; Obama on the debt ceiling, 2006 version; New Wichita city council members; Project moves forward, despite missing welfare; Wichita downtown restaurants; Cato University.

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Kansas and Wichita quick takes: Monday July 11, 2011

July 11, 2011

Today: TIF in Louisiana; Overland Park may see tax hike; Medicinal cannibis to be topic; Employment on a long slow, slide; We already know it’s hot in Wichita; Pursuing happiness, not politics; More “Economics in One Lesson.”

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Arts won’t go away in Kansas

June 3, 2011

Around the country Kansas is being portrayed by government arts supporters as having taken a giant step backwards. For those who value the tenets of classical liberalism — liberty, individualism, skepticism about power, spontaneous order, free markets, limited government, and peace, to name a few — Kansas has moved forward. It’s sad and telling that arts supporters, who often claim to express the human soul and condition through their art — a viewpoint that ought to be sympathetic to classical liberalism — are not able to grasp the importance of this decision.

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Kansas and Wichita quick takes: Monday May 9, 2011

May 9, 2011

Today: Airfares down in Wichita; Wichita City Council this week; Joyland topic of British tabloid; educational freedom to be discussed in Wichita; do you want to live in the world of Atlas Shrugged?; who are the real robber barons?

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Stossel: Follow-up to ‘Freeloaders’

May 9, 2011

John Stossel has a follow-up show to “Freeloaders.”

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Kansas and Wichita quick takes: Tuesday April 5, 2011

April 5, 2011

Today: Law, liberty, and the market symposium this week; junket for Wichita lame ducks: the costs.

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Kansas and Wichita quick takes: Monday April 4, 2011

April 4, 2011

Today: Google announces Gmail motion; local elections tomorrow; Wichita City Council this week; public defender to present; what it means to be a libertarian; profits and prices.

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Classical liberalism explained

March 29, 2011

In a short video, Nigel Ashford of Institute for Humane Studies explains the tenets of classical liberalism.

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