What Market’s Aren’t; Why “Business” Doesn’t Mean “Your Business”

I'm from the Government, and I'm here to help.

Seems we’re building quite a collection of vaguely left-leaning readers named Jason. Welcome, guys. “Different Jason” makes the point that left to it’s own devices, markets created bad things like Collateral Debt Obligations. Outside of the specifics of CDO’s which I addressed in that thread, his thesis raises some serious problems, misconceptions which many Republicans share.

Take Arizona’s senile Senior Senator. He’s no fan of supply and demand, he loves big government, and his deference is always to authority and the status quo. The ’08 election featured “no difference in principle” between McCain and Obama. Heck, Matt Welch penned a whole book showing his ‘conservativism’ is a myth. And now he’s all butthurt that some of the new Republicans might be, you know … conservative.

Was it all just a bad dream? Feels like 1997 all over again–first David Brooks calls for a hacktacular new “National Greatness” movement in American politics, and now Sen John McCain (R-Ariz.) is snarling about “protectionism and isolationism” in the GOP.

The point is, that ‘free markets’ are a process; an amalgam of rules, customs and institutions, without any mind or desire. To say that ‘they created’ anything isn’t right, because there’s no ‘they’, there. Both friends and opponents of markets make this mistake, either out of convenience or malice. Corporations, however, are an entity, a legal person. And like ‘real’ people, legal people act in their self-interest, inside a market. Goldman Sachs doesn’t exist in a vacuum, it has clients who wants and need things. Goldman makes money by matching one set of customer needs (the need to borrow or buy) against another set of customer needs (the need to sell or loan). Goldman makes tons of money because it is better at this matching than anyone else. Goldman exists because it serves. That’s the market processes at work. There’s even evidence that markets make us more ethical, because we must treat unknown others with some basic level of dignity and respect. As Matt Ridley puts it:

Most people are fundamentally honest, trustworthy, and fair. Why? Because they have a capacity for empathy and trust that is just as innate as their capacity for selfishness. It evolved in order to enable people to capture social benefits through exchange. Markets not only need that instinct; they also nurture it. This simple and beautiful idea has been disinterred by the authors of this book from beneath the cynical sophistries of the twentieth century.

Libertarians tend to believe that the appropriate role for government is to delineate the legal lines where “self-interest” veers over into “harm to others”, and that legitimate regulations are those which address and cost-effectively correct this behavior.

This is a morally ambiguous view of markets, and of businesses. Businesses and markets aren’t good in and of themselves; they are good because, and the degree to which, they promote good outcomes in the world. Such outcomes include customer service, satisfaction of subjective demand, creation of value, and creation of opportunity and socio-economic mobility. None of this is to imply that markets are perfect or perfectly efficient; they aren’t, and can’t possibly be unless every actor in them had perfect knowledge of both the present and future. Markets are just the most efficient method, so far discovered, of processing wide-spread and diversified knowledge and transforming it into social and economic value.

But this also means that businesses and markets can act with bad consequences. The market-failure argument is real. So is the government-failure argument. What gets glossed over is that both failures happen for the same reason.

So, Republicans, the concept of ‘business’ as an operative system is distinct from “my business, for which I would like political protection from market forces”. This means you need to stop championing any particular business, of bailing out anything “too big to fail”, and believing that stability is the same thing as order. Those of you like Different Jason (and regular, vanilla Jason) who think that government is always the solution to market failures should examine you belief and see what the processes you’re arguing for stop. If, for instance, you want CDO’s regulated to protect investors, you have to wonder why Goldman Sachs wields such influence with the administration. If you want everyone to have a basic level of health care, you have to ask if letting insurance companies write the Obamacare bills was the way to get it. And Republicans, if you want to cut spending, you’re going to have to address the defense budget, the war on drugs, and the lying, child-molesting TSA and their security-theater bullshit.

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