Arnold Kling  

Business vs. Markets

The Stimulus Debate, Revisited... Punk'd By Krugman? What Happe...

This post is in part inspired by the "sentence to ponder" quoted by Tyler Cowen.

Consider the following matrix:


The point is that there really are four separate categories, not just the two pro's and the two anti's. On health care reform and bank regulation, I would argue that the Obama Administration is trying to be pro-business and anti-market. The wonks do not trust markets at all, and they think they can do a better job of regulating them. But they are more than willing to keep big business interests happy.

An important point is that well-established businesses do not trust markets either. The last thing that a well-established business wants to see is a free market. What it wants is a regulated market that keeps competitors at bay. The people who benefit from free markets are small entrepreneurs and, above all, consumers.

There are some people on the left who are anti-business as well as anti-market. But that more populist left tends to lose out in policy discussions.

On the Republican side of the aisle, you get some folks who are pro-market. But more often they, too, confuse pro-business with pro-market.

Pro-market and anti-business might seem like an odd combination. But those of us who oppose "too-regulated-to-fail" as a strategy for large financial firms and instead support making failure a viable option for any business might be put in that camp. Those of us who want to see a free-market health insurance system replace our jerry-rigged system of employer-provided plans and state-regulated individual plans (you cannot sell health insurance to individuals across state lines) also might be put in that camp.

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CATEGORIES: Political Economy

COMMENTS (16 to date)
B.B. writes:

I am not fond of the taxonomy. It has too much of a Marxist flavor.

Marx had a two-class model: the capitalists ("business") and the workers. Each class had a homogeneous interest internally, in opposition to the interests of the other class. Each class had an ideology. Pro-market ideology simply justified the interests of the capitalists; labor union and socialist ideology justified the interests of the workers.

I appreciate you correcting Marx: the ideology does not neatly line with with class interest.

BTW, where are the workers' interest in your grid? How about pro-market, pro-worker?

The problem with Marx and you is that you retain the idea that each class has a single interest. Not so. Businesses have vastly conflicting interests, as do workers, politicians, and national governments.

For example, some major public utilities are leaving the Chamber of Commerce over the latter's opposition to climate change legislation. Altruism? Or maybe because those utilities have a lot nuclear power and figure they will benefit from new regulations. And do car companies and oil companies have the same interests? Does Google have the same interests as Microsoft?

So lose the "we"! And lose the "you" also.

There is no such thing as a "pro-business."

Les writes:

I think Arnold has hit the nail right on the head. In THE WEALTH OF NATIONS (1776) Adam Smith wrote:

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.” Adam Smith clearly favored markets but did not admire all businesses. So Smith is in Arnold's Northeast quadrant.

Socialists and Communists are in the Southeast quadrant. Big business appears to be in the Southwest. I'm not sure who would be in the Northwest, but I would question their judgment.

Will Henson writes:

You need to define "business" further. Are we talking GE or the barber shop next door?

Stephen M writes:

I don't like the matrix at all - it isn't indicative of how I view the market. It lumps the market view as a zero-sum game in the same way the pro/anti-business grouping does.

The market is amoral, so something that is pro-business (in the sense of favorable regulation or subsidy) is anti-market. Something that is anti-business (again regulation or subsidy) is also anti-market. Anything anti-market is both pro and anti business since some businesses benefit arbitrarily while others do not.

T Schanel writes:

"while businesses will use the rhetoric of the free market when it suits their purpose, they will dump it in a minute when it does not." - Thomas Sowell

Joe Marier writes:

More interestingly: can you be pro-market and pro-labor?

Z. M. Davis writes:

"Pro-market and anti-business might seem like an odd combination."

Enter Kevin Carson and the libertarian left.

Don the libertarian Democrat writes:

Following Les, from Adam Smith's Lost Legacy, I wrote:

As per usual, your description of Adam Smith's views are essentially the same as mine. What's shocking is that this description of govt isn't very different than what I see now in the US, especially as it concerns the Banking and Financial Sectors:

"To summarise Smith as saying that “Government should interfere with commerce as little as possible” is another back projection onto the historical facts. It conflates Smith’s “violent attack” on the conduct of political economy in mid-eighteenth century Britain, in the form of “mercantile”, government-sponsored, monopoly privileges granted as favours to special interests, as promoted by individual legislators, and those who influenced them, often associated with bribery and other favours (of which the East India Company was a prominent example), with modern misinterpretations of Smith’s legacy by his epigones."

Isn't that a description of our US Welfare State?

I think that your matrix is spot on. I'd also mention this Milton Friedman classic:

Richard A. writes:

As I see the Republican party, it can be divided between those who are pro-business to the point of being anti-market, and those who are pro-markets and have no problem giving rent seeking CEOs the middle finger salute.

Les writes:

I read the Milton Friedman material cited by Don the libertarian Democrat.

Thanks for this reference. It clearly and completely answers all the questions posted by participants in this discussion.

Alan Crowe writes:

I call this Two From Four thinking.

Wilmot writes:

I think people criticizing Arnold's matrix are being too nit-picky. Yes, we know there's no such thing as "we." Thanks. Got it.

But since we're only mere econ and business majors and not English professors, we're probably going to have to suffer with using the same speech as the rest of society.

Dewey Munson writes:

"But those of us who oppose --"
Why isn't economics like math with general agreement among leaders?

Sheldon Richman writes:

Pro-market, anti-business strikes me as a bit strong. Pro-market, business-wary might be better, if less pithy. In a mixed (corporatist) economy, there are definitely good grounds to be wary of big firms. Not that bigness is bad per se, but the political-economic environment warrants suspicion that a particular case of bigness has its roots in privilege not market virtue. Guilty till proven innocent, I say. A truly free market would impose more severe limits on size than we might suppose.

Matt writes:

Just want to second the Kevin Carson recommendation; IMHO he's the most important economist of the early 21st century. The article that turned me on to him can be found here:

Prakash writes:

To answer Joe Marier, it is possible to be pro-market and pro-labour. Georgists and Basic Income Guarantee advocates are perhaps the best example.

Georgists, by advocating shift of taxation away from income towards land, try to improve the situation of the worker via market means.

Similarly BIG advocates say that minimum wage is not required if a BIG is in place. This is a pro-market (relative to minimum wages - not distorting the relative prices in a labour market) and a pro labour (increasing bargaining power of labour) measure.

The 2 ideas are combined in the idea of a citizens dividend.

Other pro-market and pro-labour suggestions could include incentive to employ schemes.

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