I’m sure I’ve written on the pseudo-economic concept of the “free market” a couple of times now, but I find it an interesting concept. I seem to see references to it all over the place, and from people who really ought to know better. It makes me think the “free market” must be one of the great rhetorical inventions of all time. The epicenter of economic equivocation. The nexus of nonsense. The crux of confusion. You think I’m overdoing it? Well, maybe. Bad economics is a rather well developed field at this point. Anyway, let’s take another whack at it today, shall we?
The first question any reasonable person might have about this “free market” is whether it’s meant to be a theoretical construct, something like the “perfectly competitive market” discussed in the theory of neoclassical welfare economics, or it’s meant to be an actual, existing instance of a real market system. If I were to open my window some fine day might I behold the “free market?” Or is that taking things too literally? Is it more of an unreachable goal of abstracted perfection than a real thing that might exist in the world?
It matters because there are theoretical constructs from neoclassical welfare economics, like perfectly competitive market outcomes, Pareto optimums, and so on, that are typically meant to be evaluated in the rarefied atmosphere of what I call the Fairy Land of Economic Theory, in which certain ostensibly controversial ethical issues relating to markets and economic systems are set aside, including distributional issues but others as well if one is seriously interested in avoiding ethical controversy of the sort associated with distributional issues, or eliminated through use of false factual premises or incompletely defined sets of conditionals like perfect rationality or perfect information that are clearly designed to avoid ethically controversial situations. So discussing a “free market” presumed to exist in the real world is necessarily a rather different issue from discussing an artifact from the Fairy Land of Economic Theory.
If the “free market” is not meant to be just a dumbed down version of the theoretical construct of the perfectly competitive market from neoclassical economic theory, what sort of market structure or structures are we accepting into the definition? Just whatever happens happens? Unimportant? Doesn’t matter? Because it’s “free?” So, for example, monopoly is just fine in the context of the “free market?”
If the “free market” is meant to be just a dumbed down version of the theoretical construct of the perfectly competitive market, what is the “free” about, I wonder? Are we making the empirical claim that real markets will necessarily run to perfect competition once “free?” Why? Given the stringent requirements of perfect competition, one wonders if any instance of a perfectly competitive market exists anywhere in the world. Certainly seems a far cry from supposing every real market is destined to take on those characteristics as a matter of course.
And what, I wonder, is the word “free” about anyway? Because surely we’ll need government monopoly of power, police, courts, prisons, property, contracts, and so on if we’re meant to have a market. We’re certainly not talking about anarchy. One may be free to do what likes under the legal conditions democratic government has set up to define and make possible the market, but one is certainly not free to do whatever one likes more generally. I suppose we’re just saying we won’t do anything to address market failures and distributional and other ethical issues? So the “free market” is really only “free” from improvement and correction by the same democratic government that created it in the first place and that actively maintains the conditions for it to continue to exist? Seems an interesting use of language.
Well, let’s cut to the chase, shall we? Whenever I read or hear someone talking about the “free market” rather than something sensible I recognize from real economic theory, like market structure, market failure, “utility,” distributional issues, legal property specifications, and that sort of thing, I usually assume the person is a purveyor of bad economics interested only in using sloppy, ill defined quasi-economic rhetoric in a rather transparent attempt to pull a fast one on people.
The odd thing is one can often hear trained economists waxing eloquent about the “free market,” so one must suppose quite a few economists are also purveyors of bad economics. Seems odd. Funny old field, isn’t it? Interesting pedagogy, that’s for sure. Are economists experts, fools, charlatans? Some of each? I wonder, has a less rigorous field than economics every found a home in higher education? A field less interested in correcting popular misconceptions and errors about its subject matter? Doesn’t seem likely, does it? We should fix bad economics.
