Bryan Caplan  

Why Cronyism Doesn't Explain the Free Market's Unpopularity

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I could be wrong, but it seems like one of left-libertarians' main goals is to salvage populism.  Most libertarians condemn the public's anti-market reflexes.  Left-libertarians reply, in essence, is: "It's only natural for the public to condemn the unholy alliance of big business and big government that passes for 'the free market' nowadays."

The key problem with this position: Normal people think that government is the solution, not the cause, of monopoly problems.  Before I studied economics, I repeatedly heard about government's struggle against monopoly - and never heard that government might be part of the problem.  I've been arguing about monopoly for two decades - and teaching about monopoly for the last thirteen years.  As far as I can tell, the idea that government habitually creates monopolies on purpose is largely limited to free-market economists and the hard left.

So what?  Well, if most of public isn't even aware of the government-monopoly connection, it's hard to see how "cronyism" could explain public hostility to markets.  What the public objects to, I'm afraid, is the market mechanism itself.  That's why protectionist arguments are so popular; the public doesn't like to see foreigners showering consumers with cheap goods - and welcomes government-business alliances to handle this "problem."

What about the hard left?  I'll admit that they're often aware of the unholy alliance of business and government.  But it's naive to conclude that their real beef is with cronyism, not the free market.  Strange as it seems, the hard left sees the unholy alliance of business and government as an argument for government.*  Marxist historian Gabriel Kolko wrote a whole book about crony capitalism, but his research certainly didn't shake his faith in socialism.  As he bluntly explained:
As I made clear often and candidly to many so-called libertarians, I have been a socialist and against capitalism all my life, my works are attacks on that system, and I have no common area of sympathy with the quaint irrelevancy called "free market" economics.  There has never been such a system in historical reality, and if it ever comes into being you can count on me to favor its abolition.
Libertarians have every reason to attack cronyism.  But cronyism is not the wedge issue that left-libertarians imagine.  The public would still deeply resent markets even if government stopped playing favorites.  Indeed, the public's complaint is often that the government fails to play favorites when it should; international trade is only the most obvious example.

* The hard left argument, I guess, is that the weaker business is, the less able it will be to corrupt government.  But can't government be corrupt all by itself?


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COMMENTS (50 to date)
Tom Hickey writes:

As a member of the hard left, I can say with some authority that not all hard leftists are down on free markets — if they are actually free, i.e., competition on a level playing field among approximately equal players, rather than leaving the influential (privileged) free to do as they please, the social consequences be damned.

The hard left distrusts big business because as many businesses get larger and more influential, they seek a leg up by hook or or by crook, and eventually legitimate profit-seeking as a reasonable return on capital turns toward rent-seeking and crony capitalism. This tends toward monopoly capital and plutocratic oligarchy, a prelude to corporate statism.

The hard left is not terribly comfortable with strong central government either and prefers decentralization, since centralization of power is difficult to control once usurped. However, the left also recognizes that they cannot count on big business to deal fairly and openly, and only the countervailing force of government has the power to keep big business in line. But there is always the possibility of state capture through influence.

Moreover, Hyman Minsky has described the stages of the financial cycle, ending in Ponzi finance. Greenspan left the banks to self-regulate and the predictable happened. In this case, Fed "independence" was a disadvantage, since there were no electoral consequences.

The chief reason that the hard left is willing to trust big government more than big business as gatekeeper is that government is at least subject to the electorate on a regular basis. Business never is.

The greatest difference I see between the hard left and the hard right is the hard right sees society as an aggregate as individuals while the hard left sees society as a social system in which relationships of individuals and groups to each other and the whole are as significant operationally as individuals as elements of the system. As a result, the left emphasizes community, empathy, and shared goals, in addition to individual liberty within the bounds of reciprocal rights and responsibilities, and equality as absence of privilege.

Fazal Majid writes:

The explanation is simple, if the public believes there is indeed government fostering monopoly, but that it is not inherent to government. The root cause is seen to be a specific instance of government run by presumably corrupt and venal politicians. The interesting thing is that this view (that government run by good politicians can fight monopoly) can coexist with widespread cynicism about politicians. Then again, combating monopolies is not the primary priority for most voters, which is why corrupt politicians may be tolerated if they deliver on the higher priorities.

This reminds me of trotskyists who wave away the failure of communism because the communist regimes were not in fact communist but really "state capitalism". The fact no communist regime ever managed to avoid devolving into state capitalism does not strike them as rather damning.

That said, the connection of government and monopoly is strong in the US because of the exceptionally high venality of its political class, and the structure of its government, designed to promote stability over democracy or accountability. It is far less so in Europe. This is in part due to a less legalistic culture and one where powerful corporations cannot as easily tie antitrust proceedings in a morass of litigation as is the case in the US.

Artturi Björk writes:

Tom Hickey: Thanks for a very good comment. There are parts I disagree with, but they are things that can be discussed without antagonizing anyone.

I wish all discussions between free market economists and the "hard left" would be this good, instead of the mudslinging fests you usually read on blogs.

Max writes:

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Henry Milner writes:

@ Tom Hickey:

I would echo Artturi's comments about your post. Maybe there is little room for philosophical agreement on your last point, but I would like to comment on the one prior to it:

The chief reason that the hard left is willing to trust big government more than big business as gatekeeper is that government is at least subject to the electorate on a regular basis. Business never is.

What do you think about Arnold Kling's ideas about dynamic efficiency? Monopolies may indeed not be responsive to consumers, but high prices create incentives for innovation on the supply side which often destroys entrenched monopolies after a period of dominance. An historical example is the railroad companies; a more recent one is Microsoft (which seems to be dying a slow death amid more competent competitors on several fronts). This kind of innovation is by nature difficult to regulate (since it is new, and the law moves slowly), so even an unholy alliance of government and monopolist may have difficulty restricting entry. Though the innovator may eventually gain market power too, it must offer higher value to customers than the previous monopolist.

Why do I think this is better than (or should not be supplemented by) antitrust policy, implemented by politicians disciplined by elections? I'm not sure I have a coherent theory, other than the usual libertarian ideas about public choice and natural rights. Maybe an argument could be made that politics is less dynamically efficient than private markets because politicians respond to median voters and are therefore insensitive to changing preferences in most of the electorate. But in any case, I do not think it is accurate to say that big business are not subject to powerful long-term constraints.

Troy Camplin writes:

You certainly got one thing right: a main objection against free trade is that we are trading with *foreigners*. Nobody likes to admit this, but that's the real situation. Nobody objects in Texas if their GM's are made in Arlington, TX, or somewhere else in the U.S., but there is objection to "foreign cars" like Toyotas, even if those cars are in fact made in the U.S. at a plant in Kentucky. Objection to free trade is part of the primitive resistance to others not in your tribe.

Badger writes:

Asterix comic book "The Mansions of the Gods": the Gauls benefit from trading with one another, but lose from trading with Romans.
Caplan needs however to explain us one thing: what's the origin of the "anti-Caplan bias" that I've been observing among some economists?

JamieNYC writes:

Brian, unfortunately, I think you are right - the people object to the free market itself. I read an explanation some time ago (cannot provide any references, sorry), and it has to do with the following:

There are four basic types or relationship among people: communitarian (among family members, for example), hierarchical (the boss and the subordinates), reciprocal (tit-for-tat), and free market. Of these, the last one is evolutionary new. While people seem to have innate understanding of the first three, the free market relationship is something we have to learn about. And yes, as Troy pointed out, all sorts of irrational beliefs spring up when people think of a free market relationship ("why should we get foreigners get rich by selling us cheap goods?"), but this happens exactly because we don't have a natural understanding of it.

David C writes:

If the public is dead set against free markets, and simply unaware of cronyism, then why wouldn't making people aware of cronyism yield more benefit?

Vincent Ignatius writes:

I do not consider myself a left-libertarian, but I will often bring up cronyism in arguments. I agree with everything you have written, but I also recognize that the existence of cronyism can be used to win support for our side.

Les writes:

It should be a slam dunk! Government itself is a monopoly.

Government is by far the largest and most powerful monopoly in virtually every nation (except for a few failed states, like Somalia or Yemen)

Hume writes:

I consider myself a pretty avid libertarian. Recently, however, I was re-watching Milton Friedman's television series "Free to Choose" and I picked up a very subtle point made by Jagdish Bhagwati re: free trade. Milton was advocating free trade policies no matter the situation, whether the foreign country subsidizes an industry or not, because it is always in our best interest to do so. Bhagwati's comment was this: we might benefit from receiving stolen goods, but that doesnt make it right. If the actions of foreign countries amount to something along these lines, should a libertarian support trade with these countries?

Paul S writes:

Being so far left that I am slamming into the far right, I would like to share a story. During the bubble I tried to sell a piece of property for four times what I paid for it. Those who say they didn't see a "bubble" were temporarily blinded, I guess. I succeeded in selling the house in the spring of '08 for three times what I had paid for it in 1990. I placed the money in a small bank that had recently opened in a nearby town directly across the street from a BOA branch. A manager there told me the bank was going public soon and that I could buy shares at a set price because I had an account with them. I did just that. After the IPO, the stock bounced up thirty percent. Since the bailouts the stock has languished at twenty per cent above IPO, not bad ,but over two years what once was thirty and climbing is now ten percent ROI year over year for two years. Not bad, but had that BOA been allowed to fail, my little bank may have grown, the stock may have doubled, maybe not. BOA is still there across the street. The big boy in town, and like I learned in high school, the big boys, the faster boys, get picked for the teams. The football team, the basketball team, the baseball team, the track team. They get bailed out! Out of class, out of detention, out of homework. You could call this system a "free market", but sometimes, it looks like a "rigged market" to me, "team players". As long as you are a member of the team you get treated differently, "bailed out." The little bank will grow, it will just take longer. A lot longer than it could have, a lot longer than it should have. Just because some of us are blind, doesn't mean everyone can't see.

Dylan writes:

@Tom Hickey

Regarding Business never is subject to the electorate on a regular basis.

If we consider the price mechanism the result of a type of "vote" through purchases on the market, and the monopolistic firm is subject to at least somewhat elastic demand then even without the threat of competition, the monopolist´s decisions would be restricted by the price/quantity that consumers would willingly pay. Business is still subject to market forces, and the monopolist may be efficient if for little else than to maintain his monopoly (logic along the lines of Henry Milner)

Tom West writes:

The government works for *your* benefit while a company in the market works for *its* benefit.

"But that's not true!" many may reply. However, that doesn't matter. Most people look at the first order claim and leave it at that.

And that, simply enough, is why people trust government over the markets. Motive (okay, claimed motive) matters.

Current writes:

Tom West, amen to that. After many discussions with leftists I've found that this is always the sticking point. They look at the stated aim and go no further.

Recently in Britain the mismanagement of a state-owned hospital cost 1200 people their lives. But, because the stated aim of the National Health Service is positive people are willing to overlook this.

TheVictor writes:

I have to say that as a newcomer to the study of economics, these conversations are very interesting...both sides. However, the reality is that without good information, good decision making is a crap shoot. For 'free markets' to work as described by its proponents there is a level of economic literacy required by those who are engaged in the markets. Otherwise, the population is taken advantage of by any means necessary because the goal of any capitalist is to produce profit. It is very important for the citizens of this great nation to understand the importance of education, not just as a ticket to higher income, but as a check against the INTELLECTUAL ABUSES of a uneducated population.
I believe that the aims of neither the government or of big business particularly align with an Enlightened America.

ERIC writes:

This is a great distinction to make. How often do you hear people secretly admit something that would go against something they publicly favor? I've heard it many times. Think of those in unions who face international competition. They know they don't work hard for their money deep down but rarely admit it to others -- it is there though, trust me.

Basic instincts take over when faced with opposition, i.e. being able to provide food and shelter for ones family. Problem is members take a short term view and don't want to lose their jobs while others not in their union will likely achieve a greater overall benefit by allowing competition.

To me this is funny when you consider the psychologically adaptive quality of humans that having suffered great loss (accident leading to loss of legs) or great gain (lottery winners) after one-year on average they return to "normal". (Happiness is usually the metric but that is beside the point.)

This should apply equally to job loss, which is really what the fuss is about at the end of the day. The further away the impact is from you, the less you care to stand up for it. Anybody ever walk the picket line for some group you don't care about because you had nothing better to do Monday morning...I doubt it.

So make the transition easier, lowering the fear factor of job loss, and promote "change" in general instead of paying lip service to it so that people are OK when it eventually happens anyways. (Isn't that the irony!) I think we do a bad job in society of managing peoples expectations, but maybe this reason for the all to frequent disconnect between what "is" and what "ought" to be. (Maybe we really do have "ought" -- it's just that our time-frame is too short.)

Aren't you surprised sometimes at how "good" things are given how "bad" things seem?!?

DayOwl writes:

I would submit that the very nature of government is corruption. Its real purpose is to protect the assets and power of those who possess them. They accomplish protection by corrupting free markets. Regulation succeeds in limiting or eliminating competition far more than it protects consumers.

To echo other comments: Very little commerce in our country meets the true definition of free markets. When people object to "free markets", they are really objecting to the inevitable changes in fortune that markets bring about, regardless of their "free" or "distorted" nature.

My own opinion is that if people had a good understanding of what a truly free market is, they would object far less.

ERIC writes:

I'd add that if there was a good chance of a market actually being free, people would resist a lot less.

It is impossible to know everything on anything and I find that even when you think you know something you must always consider the others point. In this case, if we are kind of "blaming" the average person for their lack of trust in markets, could it be that they have a fairly good heuristic for not trusting them given the inevitable corruption they have witnessed time and again?

Just because somebody can't give you a good reason for why they think or feel something, doesn't mean they are wrong (or right!) and also doesn't mean that they could end up (by luck alone) acting in favor of their own best interest. And to take a bit of a long-term, evolutionary view, those who act unwise likely won't be fortunate enough to propagate further, no? Is this, like most other problems, given enough time, self-correcting, who knows? Tough to ignore the power of entropy though!

Vangel writes:

It is obvious to any observer that market rewards are not very equitable. In a free market, producers compete for consumer patronage. Failure is punished while success can lead to lavish rewards. The big problem for most people is created by the distribution of compensation.

Most people have a naive utopian expectation of the world. When it comes to compensation most individuals expect to see a normal distribution because production output is dependent on individual effort. Because most people put in time doing their job they expect to be compensated in a similar fashion to others who are making the same effort.

But that is not the way the real world works. In a free market compensation is scaleable because output is not limited to effort. While the compensation of doctors, dentists, call girls, teachers, university professors, policemen, and journalists is limited by the amount of time they have to put into their jobs, the market imposes no such limits on investors, writers, artists, publishers, producers, etc. It allows James Cameron to make billions for the same amount of work that would provide a few hundred thousand dollars to a university professor, and for an accurate quarterback who can make the right reads and has the arm to make the required throws to earn in one year more than the average university professor would earn in a lifetime.

That brings me to a subject that Leo Strauss and Ludwig von Mises considered essential when trying to explain human action; thymos. Most people have no clue about the subject because thymos, that irreducible part of human nature, that made men act and think as they do and was an essential part of the human soul, is not discussed much in the modern classrooms. Yet, it used to be considered an essential part of human action because it is part of our emotional makeup.

Most people will consider the way that markets distributes wealth unjust. It is certain that the university professors who makes around $100 K a year won’t look kindly to one of his drop-out students making billions by coming up with an idea that gained broad acceptance among consumers. Teachers who are unfamiliar with marginal utility will argue that the markets are broken. They will say that they should be paid more than jocks who can run fast and throw a football because teaching children is more valuable than paying some game. Journalists who see men and women of average intelligence make billions because they happened to come up with one idea will tell readers that the markets are unfair. Many people who were quite good at many subjects will find it demeaning that they are working for people who were are generally mediocre but happened to be better than they are at one thing. (Why should a person who averaged five As, and one B+ be working for a person who got Cs in most subjects and an A++ in just one?)

To sum it up, the anti-market sentiment is easy to explain. It is triggered by a natural emotional response in people who are hard wired to react to the mismatch between their ideal view of the world and reality.

Current writes:

TheVictor wrote: "For 'free markets' to work as described by its proponents there is a level of economic literacy required by those who are engaged in the markets. Otherwise, the population is taken advantage of by any means necessary because the goal of any capitalist is to produce profit."

No, economic literacy isn't necessary. All that is necessary is that people understand their own personal situations. Each buyer or seller should take the time to understand if the transaction they are undertaking is best for them. This isn't economic literacy, it's common sense.

Economic literacy is understanding how things work at a much higher level. It's about understanding how the actions of many combine together.

The situation is exactly the opposite of that which you describe. If there is heavy intervention in markets by government then the voter must be economically literate to understand that intervention. If there is no or little intervention then economic literacy isn't as important.

hacs writes:

"The public would still deeply resent markets even if government stopped playing favorites. Indeed, the public's complaint is often that the government fails to play favorites when it should."

But prosaic observation shows us that firms have the highest free-market aversion, far above of people. The firms' survival is a fundamental reason why free-market institutions, almost surely, would converge to institutions favoring business (as actually it is). Political engagement and lobbyism are direct consequences of that fight. As political colossi (in comparison to a person, as consequence of their economic power), their influence on laws and regulations is inevitable. In this configuration, the people's benefit is, at the best, an erratic and unintentional externality. In other words, free-market institutions are unstable, and each time some of these ideas are implemented, along of the time, furtively, essential parts of these reforms are reverted in favor of lobbyists and political campaign supporters (firms), resulting in a system devoid of rights for consumers, and full of guarantees to several business sectors (as actually it is).

So, it is not the public, but the firms, the reason of why is so difficult to change this arrangement.

Dan Weber writes:

Good discussion.

For 'free markets' to work as described by its proponents there is a level of economic literacy required by those who are engaged in the markets.

Not so much. If people like Bob's coffee over John's coffee, Bob's coffee will succeed, even if they don't know why.

For me, the ability to vote on a system is vastly inferior to being able to leave it. When people say "but I can vote for my government," they often forget that their neighbors can also vote for government, and your neighbors can get together and decide that you suck and don't get to own property any more.

To the first-order approximation, governments and markets are equal at serving majorities. Markets don't fulfill the needs of tiny minorities, and governments usually don't either.

But markets are vastly better at serving non-tiny minorities than governments are. If 1% of New York loves your pizza, you will prosper. If 1% of voters think you are awesome, too bad.


jc writes:

@ Hume: Interesting point

@ Troy Camplin: Yes, there may be an evolutionary, tribal basis for these feelings. Friends of mine who hate Bhagwati never have a good answer as to why they do not object to the outsourcing of jobs as long as it's automated robots instead of foreigners now doing the same work for less.

TheVictor writes:

Current: The situation is exactly the opposite of that which you describe. If there is heavy intervention in markets by government then the voter must be economically literate to understand that intervention. If there is no or little intervention then economic literacy isn't as important.

Where is the implication of intervention found in my comment? Should we not encourage education of our population?

I think, as many here do, that goverment intervention has been just as malicious as a unaccountable corporate citizenry! My point is that whether its 'voting with dollars'in the instance of corporate accountability or changing our representation in DC to lessen 'government intervention', the results do not change absent a population that understands their own economic reality. Only then can we identify viable devices as individuals to ensure REAL free market growth.

jc writes:

@ Dan Weber: "But markets are vastly better at serving non-tiny minorities than governments are. If 1% of New York loves your pizza, you will prosper. If 1% of voters think you are awesome, too bad."

What a nice, easily understood way to explain things.

Unfortunately, many people I know would love to make their neighbor eat the kind of pizza they, themselves, prefer. OK, so maybe they don't go that far. But they do honestly think that they should be able to force others to act in the manner they think is appropriate. It's like a little kid saying, "Mom, make Billy do it this way!" (Of course, there's a bit of hypocrisy as they hate it when others force them, but they don't really think of it that way.)

On a more humorous note, it reminds me of the following:

"Governor Stevenson, all thinking people are for you!"

"That's not enough. I need a majority"

Current writes:

hacs,

A firm has an interest in preventing a free-market in those goods that it is selling. It has an interest in promoting one in those goods that it is buying. It has no interest in other goods in markets that it doesn't trade in.

Comparison of the political power of a firm to that of an individual is irrelevent. It is the comparison of the political power of groups of people that is relevant.

Consider unions for example. I'm a Brit, my country was wrecked by them in the 70s and 80s. Lobbying and influencing of politicians doesn't have to be done by businesses. If there were no powerful businesses to do it then unions would do it.

In my view the key problem here is a lack of belief in the rule-of-law. What allows governments to have corrupt relations with big business or big unions is *discretion*. The state bureaucracies make many wide ranging and small interventions in business, this allows them to hide those interventions made on behalf of interest groups. It is the size and opacity of the state and the bureaucracies that brings the problem about. If the state made fewer, larger decisions, and made more day-to-day ones on the basis of fixed rules things would improve.

Research into the developing world has shown that countries where officials have a great deal of discretion in their decisions underperform compared to countries where they have less discretion.

Current writes:

TheVictor: "My point is that whether its 'voting with dollars'in the instance of corporate accountability or changing our representation in DC to lessen 'government intervention', the results do not change absent a population that understands their own economic reality."

You are still missing the point.

To understand what the government does requires overlooking all their activities. This is the task that requires understanding of politics and economics. Nothing similar is required to understand if a person is getting a good deal from a business or not.

The only similar situation with business relates to things like the environment or corruption. But those are questions about side-effects. For the government all questions are of that sort.

There is no "unaccountable corporate citizenry". Businesses are accountable to the only people they should be accountable too - their shareholders.

Current writes:

I'm rather disappointed folks buy this "corruption through lobbying is inevitable" idea so readily.

Read about the past. Certainly in Britain before WWI the situation was vastly better than it is now. There was little interference in the domestic British markets throughout most of the 19th century. Of course there was some, but much less compared to the current situation.

Preventing intervention from happening is not a futile endeavour, it has worked in the past.

Floccina writes:

Tom Hickey focuses on big business as many do, but individuals and small businesses seem to me to mostly treat customers worse than big business and of course Governments treat me even worse (that might be because I am not poor, the poor do get some free stuff from gov.).

sean writes:

Spot on Bryan,
This ideology is epitomized in the new Michael Moore film, where the director does an excellent job to reveal the "cronyism" occurring while concluding that capitalism is at fault and the solution must be found through "democratic" government intervention. It seems there are large disparities between economists views of monopoly: with some adhering to the strict definition of a single buyer; some maintain the concept of "monopoly pricing" which does not necessarily apply to all cases of definition one; and some view that monopolies may only occur through government restriction of competition. Perhaps this should be the more widely discussed issue as opposed to free-market capitalism (to which both proponents and opponents respond: "this has never existed") versus "crony" capitalism, where there is a tendency to believe that more representational politicians and "better" regulatory systems can fix.

hacs writes:

Current,
If you are saying that my comparison is irrelevant in a unionized labor market context, I agree, but in a free-market context (free of unions, small government, deregulation, etc), it is the most relevant comparison for the institutional dynamic onward.

Current writes:

"Tom Hickey focuses on big business as many do, but individuals and small businesses seem to me to mostly treat customers worse than big business and of course Governments treat me even worse (that might be because I am not poor, the poor do get some free stuff from gov.)."

Also, they often have the best interest groups.

Go to Ireland and buy a pint of Lager in a pub, it will cost ~4 euro or ~$5.40. In Britain that Lager will cost ~£2.70 or ~$4. But, taxes on alcohol are higher in Britain.

The reason for the difference is that in Ireland bars are generally owned by small businesses. In Britain they are owned by breweries and chains.

The small businesses in Ireland united to form the Vintner's federation of Ireland. This organization has lobbied very successfully to restrict competition in the pub trade. For example, in Ireland each town or locality has a fixed number of licenses for pubs. A businessman can't just open a new one, the number of pubs must stay the same, so he must buy a license from a pub that is closing.

If this were done by a large corporation or chain then the public would be up in arms about it. But, because it's done by a friendly sounding industry group they don't complain as much.

Current writes:

hacs: "If you are saying that my comparison is irrelevant in a unionized labor market context, I agree, but in a free-market context (free of unions, small government, deregulation, etc), it is the most relevant comparison for the institutional dynamic onward."

I'm not sure I understand your point.

I don't know why you think that a free-market should be free of unions. Obviously unions are part of a free market - just as businesses are.

Wilmot writes:

Bryan,


I think what people hate is actually the effects they see from the "unholy alliance" and they simply accept the explanations given that free markets are evil.

MernaMoose writes:

Hume,

Bhagwati's comment was this: we might benefit from receiving stolen goods, but that doesnt make it right. If the actions of foreign countries amount to something along these lines, should a libertarian support trade with these countries?

Interesting point.

Counter-point: how far down this road is it rational to go? Is it even possible to define objective standards for guidance? Because if we start looking really close, I expect we may not find anyone pure enough to trade with.


Which leads to an interesting side bar. The Left's vehmence against the Christian Right has been a big knee-jerk for decades. Yet there's a (post-modernist?) theme I often hear in Leftist circles, particularly writers, where they like to tell stories that basically show "everyone is a slime ball when you get right down to it, nobody is really pure and good". Now if that isn't the theory of Original Sin warmed over, I don't know what it is. And I smell the same gist coming from Global Warming alarmists. "Earth and Nature, good. Man, bad." It's just Original Sin reincarnated.

Despite their differences, the Left and Right have some really strange similarities (which you would be better off not point out to either side, lest they both turn on you at once).

Current,

Research into the developing world has shown that countries where officials have a great deal of discretion in their decisions underperform compared to countries where they have less discretion.

Good point. However,

Preventing intervention from happening is not a futile endeavour, it has worked in the past.

while this is true (it worked here in the US of A too once upon a time), there are in fact reasons why corruption would seem almost inevitable. My theory on this:

Suppose you are born in poverty, but you work hard and smart and have a little luck along the way too. You build yourself a business empire and become reasonably wealthy.

Your next concern is making sure that you will always stay that way. You will be naturally in favor of any laws that will help make that so. The rich always want to make sure they stay rich. Which is in direct opposition to the poor and ambitious, who would like the doors to stay open so they can make their way up the ladder.

The social order, no less than the government, is a self-polluting proposition in the long run. As are certain software operating systems, which periodically need rebooting or they just won't work right (or sometimes even at all).

Somebody needs to figure out how to build a reset button into government. So far, we've had to rely on collapse of the existing order, and hope that the next one is better.

Troy Camplin writes:

The observation that people also feel uncomfortable with the market is that it's evolutionarily recent is also correct. It is a spontaneous social order, and we are not used to such orders. Indeed, there is something to those who criticize its alienating character (and this is true of all spontaneous social orders, not just the market -- it's true of democracy, science, and the arts). How, then, do we make people more comfortable with living in spontaneous social orders? That is the great philosophical question libertarians must answer if we are to succeed at retaining our social spontaneous orders.

MernaMoose writes:

Troy,

I'm not sure what you mean by spontaneous social order. What social orders are *not* spontaneous? Communism aside.

I also don't know what "alienated" means. The people I've heard complain about being "alienated" by the market, are people who cannot imagine what their lives would really have been like in feudal Europe. There are many among us who somehow imagine that older age was "better". As someone who's read too much history, I'm still trying to understand where this funny notion comes from. These people complain that what they have now is not enough, yet they really think they want to be Medieval peasants?

Capitalism is new on the time scale of recorded history, but I don't buy the line that people are objecting just because "they aren't used to it yet". More likely, people have forgotten (or never knew) what life had to offer before we had free markets.


I've known people who rail against "the market" for (I believe) the simple reason that they expect to be higher up the social (or even economic?) ladder by tearing down the existing order, and replacing it. Note that "replacing" it these days inevitably means some kind of more socialized order.

Opportunists who hope to benefit by tearing down the old and commandeering the new, have been around forever.


I've known people who railed against "the market" for the simple reason that they didn't want to have to work really hard, yet they also didn't want to be poor. Sorry this will offend some Lefty's, but there really are a significant number of poor people who are the cause of their own problems (I grew up among them, but did not stay among them).


I've also known many, many people who railed against "the market" out of sheer economic ignorance. The foreign trade issue is a perfect example, for many people do not see the fact that they're better off buying cheap Chinese made goods than not.


I've also known people who I suspect are against "the market" because, this is what they've been taught in school since the time they could remember anything. The socialist-leaning bent in the US educational system is nearly as consistent as it is persistent.


I don't believe there's one simple answer to the question of why people are against the market. But if I had to bet on there being one dominant factor, my money would go down on the "poor to no education" slot.

MernaMoose writes:

Just carrying on here. :)

To give my rant against "alienation" a little more flesh, consider for a moment the life that a Medieval peasant (which was the vast majority) faced: you can go out and do brutal manual labor under horrible conditions (by today's standards), or you can you can starve to death.

What part of this picture is "unalienated" compared to how people live today in the US?


I've played with a theory as to why people oppose the market, but not sure how good it is.

The people at the very top of the economic ladder will not favor a free market, because they don't want new upstarts to unseat them from their perch.

The people at the very bottom of the economic ladder will not favor a free market, because they hope that in tearing down they may get something for nothing. In any case, they have nothing to loose to begin with.

But these are the tail ends of the distribution. Of those who fall in the big fat middle of the distribution, only a small percentage are "mover and shaker" types, who will go out and start their own ventures, invent and market new technologies, etc etc. All the things that economic growth is made of.

I don't know if the 80/20 rule is really any good or not (20% of the people do 80% of the work), or if the break down is something else. But whatever the break down, there is really only one segment of the population that will naturally favor a free market and they are a distinct minority: the movers and shakers who are working their way up the economic ladder. The upstarts, the men and women of ability and ambition, whom those at the top fear and those at the bottom despise.

Still, between the very poor, the very rich, and the very talented and ambitious, we're probably still talking about a sum that's less than half the total population. Maybe much less than half.

The remainder of the people are more or less floaters, in economic terms. The people who end up more or less at the same level they inherited from their parents. These people, I suspect, don't particularly care about the free market system itself, for they have no natural motivations to either love or hate it.

Yet curiously, being the bigger fraction of the populace, these are the people who effectively decide whether the free market system is kept or discarded.

If this population segment was better educated as to what the free market does for them, they might at least not be inclined to act against it. Some of them, sometimes, might even be willing to act in its defense.

Hence my theory that education is crucial to the long term survival of free markets.

Somebody can probably shoot this whole sketch full of holes, in which case I might get to learn something.

Current writes:

MernaMoose: "Your next concern is making sure that you will always stay that way. You will be naturally in favor of any laws that will help make that so. The rich always want to make sure they stay rich. Which is in direct opposition to the poor and ambitious, who would like the doors to stay open so they can make their way up the ladder.

The social order, no less than the government, is a self-polluting proposition in the long run. As are certain software operating systems, which periodically need rebooting or they just won't work right (or sometimes even at all)."

I agree to some extent. The problem though here is that you are presuming that the fact that the rich are "in favour" of such laws must always carry similar weight. I think this is a mistake, the weight that it carries depends upon the social and institutional situations of the time.

If an administrator must simply change one of his discretionary policies then it is quite easy for a powerful person to make that so. However, if a law must be put before a parliament, debated and passed that creates a higher barrier. If that state is governed by a limiting constitution it is more complex still. Similarly, if there are many states which people may move between and to enact the change a law must be put before many parliaments and agreed then this creates a still higher barrier.

Doc Merlin writes:

It is sort of what government does, it is sort of its purpose. It is created by incumbents to favor them.
Heck its even explicitly enshrined in our constitution under Congress's authority to "issue letters patent." For those who don't know "letters patent" are a legal statement from a government granting a monopoly.

James writes:

Isn't this a strawman though? As one of the left libertarians Bryan Caplan is talking about I have NEVER claimed people are aware the government creates monopolies or read such a statement in any left libertarian work. Could he perhaps provide us with a link?

"Well, if most of public isn't even aware of the government-monopoly connection, it's hard to see how "cronyism" could explain public hostility to markets."

Really? it doesn't take much imagination to draw a link between public hostility to markets and cronyism:

cronyism causes economic problems
economic problems cause suffering
people are unaware of cronyism so blame their suffering on the free market

It's odd that the author of "the myth of the rational voter" appears to be claiming that the government-monopoly connection doesn't explain people's hostility to markets as if people don't blame the wrong thing for their suffering sometimes.

Steve Roth writes:

I would suggest that lefties think government spending should be more widely dispersed (i.e. more to individuals than to entities.)

Hence money to public infrastructure, welfare, health care, and education, rather than defense and corporate.

These streams are less prone to capture because they're not delivered in large blocks to singular entities. (Matter of degree, of course--infrastructure versus food stamps.)

Righties believe that that dispersion (of money hence power) is achieved through market mechanisms, if government doesn't create monopolies and other concentrations.

Lefties believe that is not true--that unfettered markets--especially given the *spectacular* efficiency of corporate capitalism--inevitably pump money (and power) to the top, which is inevitably used to capture government.

Lefties also believe that government is the only entity powerful enough to capture back the money (hence power), and disperse it.

Most lefties make these arguments on moral grounds, but they are better supported, in my view, by the evidence for greater efficiency, utilitiarianism, bigger pie, all boats rise, all that.

Al Coryell writes:

Tom Hickey wrote:

"As a member of the hard left, I can say with some authority that not all hard leftists are down on free markets — if they are actually free, i.e., competition on a level playing field among approximately equal players, rather than leaving the influential (privileged) free to do as they please, the social consequences be damned."

Therein lies the problem I see with this article's assertions about the public's opinion of the free market, i.e., "free-market" isn't really defined. It is not unreasonable to assert that the United States has not had a truly free market economy since 1913. So, in that context, any presumptions about how the hard-left views the free-market is moot.

Having read the author's discussion on why he is not a believer in Austrian School economics is quite explanatory as to the opinions expressed in this article. His "hard-left" is Hickey's mainstream, thus the inability for either to realize that crony capitalism, as discussed here, was the natural and inevitable outcome of a centrally managed economy and, as such, is the cause of the subconscious behavior of a herding populace to hunker down against the increasing ineffectualness of its benevolently dictatorial government... but dictatorial non-the-less.

Caged animals are the most dangerous, they say. We don't normally think about the savagery that can accompany economic revolution. However, history is repleat with cake-eating examples. So far, what passes for free-market capitalism in the US hasn't demanded more than the hunkered masses can cough up. But it will. And when that happens, the definitions of left, right, free-market, mainstream, socialist, communist and capitalist will take on a whole new set of meanings, meanings not well-understood for nearly a century.

MernaMoose writes:

Current,

True, we've got some decent institutions to slow down the decay process. However, we still have more or less democratic processes.

There are always opportunities to corrupt democratic processes. As well as the US founders did their job, this is the corner of the barn yard they didn't (in my opinion) hamstring with checks and balances quite well enough.

Americans complain that they get rotten politicians, and there are those among us who would blame "those idiot voters" for voting in bad politicians. But what we've got is only the natural outcome of democratic processes.

But then, I think the Senate should once again be appointed by the state legislatures, and the House should be appointed by luck of the draw like jury duty.

Current writes:

MernaMoose,

I think that with some better institutions the problem can be largely solved.

Sheldon Richman writes:

"But cronyism is not the wedge issue that left-libertarians imagine."

The left-libertarians I know are not as naive as this wording suggests, although cronyism is an important issue for some members of the public. We mainly want to get our story straight and correctly understood by whoever is listening. Then we can worry about persuading people of the virtue of feed markets.

Ponz writes:

"Normal people think that government is the solution, not the cause, of monopoly problems."

Polling data contradicts this assertion.

Per Rasmussen: "70% of U.S. voters believe that big business and big government generally work together against the interests of investors and consumers"

http://www.rasmussenreports.com/public_content/business/general_business/april_2009/70_say_big_government_and_big_business_on_the_same_team

Per Gallup: By a margin of 55% to 32%, voters see big government as a bigger threat than big business (among non-affiliated voters, the margin is 59% to 30%)

http://www.gallup.com/poll/117739/Big-Gov-Viewed-Greater-Threat-Big-Business.aspx

Thus, the "normal" voter both recognises the concept of cronyism and appears to see government intervention as an aggravating rather than a mitigating factor in the equation.

Miguel Madeira writes:

"So what? Well, if most of public isn't even aware of the government-monopoly connection, it's hard to see how "cronyism" could explain public hostility to markets. What the public objects to, I'm afraid, is the market mechanism itself. "

I think that you are totally confused about "left-libertarians" believe:

Their opinion is not

"the public is not against free-market, is against the alliance between the big government and the big bussiness";

is

"the public is against the free market because they think that the power of big business is a product of the free market, when in reality is the product of their alliance with big government; if we could explain that to the people, we can turn the anti-big business feeling in a pro-market feeling"

Then, the fact that most people are unaware of the alleged "BB-BG alliance" is a point in favor of their position, not against.

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