Mises Wire |
- The Problem with Public Goods and So-Called Economic Power
- Real Wages Plummet as Inflation Hits the US Recovery
- Do Markets Cater to Our Worst Impulses?
| The Problem with Public Goods and So-Called Economic Power Posted: 21 Jan 2022 09:00 AM PST In this week's column, I'd like to discuss two arguments Murray Rothbard gives that respond to influential criticisms of the free market. His answers to the two arguments follow a common strategy. In each case, he rejects the key premise of the argument. The first of these arguments has to do with what are called "public" or "collective" goods. It may well be, supporters of the argument claim, that the market can supply efficiently most goods and services. But it cannot supply public goods, such as defense, that are nonrivalrous and nonexcludable. A nation that installs an antimissile defense system, for example, will necessarily protect the whole country, not just individuals who pay for the service of defense. Furthermore, people can't be excluded from the good: a supplier of the good can't say to people, "If you refuse to pay for the good, we won't supply it to you." Rothbard's response is characteristically radical. He denies that goods of this kind exist. He says,
(Rothbard is talking about Paul Samuelson, the most important theorist of public goods.) When you first consider this argument, you might think it is open to an objection. Even if there aren't goods that are completely consumed jointly and are absolutely nonrivalrous, aren't goods like defense more or less like that? Is Rothbard saying that if a concept doesn't have instances that precisely meet its terms, it is worthless? That seems overly strict. This objection ignores the point of Rothbard's remark. He is saying that unless you use an exact definition that doesn't rely on individual judgments to apply, you have no scientific basis on which to proceed. You are then in the realm of value judgments, and economics is supposed to be a value-free science. He would say to economists who make such judgments, "You should make clear the value judgments you are using, rather than pretend to be objective scientists." Rothbard refutes with equal quickness the other argument I want to consider. It's often claimed by opponents of the free market that workers are coerced to work for capitalist employers. They aren't legally compelled to do so, but if they don't, they will starve. What kind of "freedom" is this? Rothbard's response is that even if it's true that workers have no reasonable alternative to working for capitalist employers (and this is a very doubtful assumption), there is nothing coercive about this situation. An employer who offers someone a job at a certain wage is simply making an offer, even if the offer is a poor one. A worker who takes the offer has judged that it is better for him to accept the offer than to refuse it. The offer does not worsen his situation. If the employer made no offer, he would be leaving the worker in his current state of affairs. Rothbard says this:
Defenders of the "economic power" argument might say that Rothbard has made an unsupported assumption. He is assuming that the situation in which capitalists own the "means of production" and workers have the alternative of working for them or starving is just. For reasons that Rothbard and other economists have explained at length, the objection doesn't accurately portray the real situation. But even if it did, the objection is irrelevant. Certainly, if the situation is unjust, that is a good objection to it, but then the objection is to that injustice, not to the offer by the employer. It's essential when you are looking at an argument to consider the argument on its own terms, rather than turn from it to other arguments. |
| Real Wages Plummet as Inflation Hits the US Recovery Posted: 21 Jan 2022 06:00 AM PST Friday's jobs report was weak, but the most alarming datapoint is that real wages are plummeting. Original Article: "Real Wages Plummet as Inflation Hits the US Recovery" This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack. |
| Do Markets Cater to Our Worst Impulses? Posted: 21 Jan 2022 04:00 AM PST For all the great value in Heather Heying and Bret Weinstein's new book, A Hunter-Gatherer's Guide to the 21st Century, we find plenty of enmity toward markets and market forces. The market's avarice and ravenous desire for growth is bad for the planet, and increasingly bad for us; it distorts incentives in health, in medicine, in education, and even mate selection; it doesn't know what we "truly" want and induces us into bad choices: "What we 'want,' and what the market is glad to hand us, is short-term gratification that rarely accounts for what is best for us long term. A market that is unregulated will tend to embody the naturalistic fallacy—the mistaken idea that 'what is' in nature is 'what ought' to be. When we let such unregulated markets lead, we are fed directly into the naturalistic fallacy. Just because you can doesn't mean that you should" (final chapter). As a first-pass public choice argument, we should be very skeptical about such propositions and what they practically involve. Individually, flawed as we are and with limited knowledge about the world and ourselves, we might not know what is objectively "best for us long term." But the relevant comparison imagined is that somebody else does—and that that somebody can identify it, correctly trade it off against other values and goals we may have, and ultimately enforce it. It's the mistaken belief to think that governments—that enlightened agency that performs the "regulating" part—can wield magic wands, know what is unknowable for the rest of us, and force us (or nudge us … ) into behaving better. Oh, and that once such a pristine corrective system is in place, it won't deteriorate into power plays, paternalism, or become corrupted by ideologies or special interests of one kind and another. The counterfactual against which "poor outcomes in unregulated markets" are pitted against is, to put it mildly, laughably unreal. As a deeper level, it's not clear what this argument even identifies. Taken at its best, it means that there's a conflict between what we think is best for ourselves in the near future versus the longer perspective. I may know that, subjectively, my highest desire is to stay fit over the long term by hitting the gym; this desire is undermined by how comfortable the sofa feels right now, and how yummy that delivery pizza is. This conflict between long-term and short-term ends across different domains is, if anything, a human universal: regardless of social organization or market structure, this conflict emerges. It's not clear that it is created or made worse by markets/greed/ruthless capitalism. Making matters worse, presumably, the fast-food chain and the sofa maker are equally in competition with the gym or workout gear retailer for the dollars that mark my final spending decision. Why would *the market* only operate on one side of that equation (the short term)? To think that it is the only thing that incites us away from what we today think is beneficial in the long term in favor of things that are satisfactory short term is an odd view of the human condition. The logic of the market pushes production and consumption patterns toward fulfilling our aims in better, cheaper, or faster ways. It is, at worst, agnostic about whether the things we want are good or bad, healthy or not, beneficial or not—and whether they're good, healthy, or beneficial over short, medium, or long time horizons. What's fascinating is that it comes out of two eminent evolutionary biologists. This otherwise insightful power couple is ridiculously close to grasping how very little separates economics from the subject of their own studies: ecology. I've made that connection explicit before on mises.org, even pointing to the shared roots of the words. Here are the main points of similarity:
On the last one, interestingly enough, Heying and Weinstein correctly observe in the book that we should lean against the possibility of such explanations/interventions whenever they're proposed: "We can easily intuit that, if you're a deer, in order to make a larger set of antlers, something else has to give. You've got to borrow from elsewhere in order to get bigger antlers—perhaps you lose some bone density, or spend down other reserves. Under some conditions, perhaps you could just start eating more, and grow more antlers, but this raises the question: if it were that simple, and eating more benefited you in this easy way, what prevented you from doing it before?" If there is some epistemic or institutional reason why markets can't solve (or improve upon) an imagined problem, there is little reason to think that a real-world government could either. An ideal, uncorrupt, perfectly knowledgeable government might—remember Madison's "If men were Angels"—but is that really on the table? That's the position in which most intelligent-design governments find themselves—of seeing a flaw and deciding to "fix" it. The correct question, from both an evolutionary and economic perspective, is the one posed by Heying and Weinstein: If it were so easy, "what prevented you from doing it before?" The market test, like ecology's evolutionary test, tends toward optimization; if it wasn't doing something, there probably were good reasons against doing it or insurmountable obstacles in the way. Evolution in ecology, like ruthless competition in economics, leaves very little scraps on the table. If it were possible to expand the ecological production possibilities frontier already, nature is equipped with the two ingredients required to have already found it: adaption and time. If you think you've found something superfluous in nature, like the large intestines of humans or the appendix that seems to give modern humans nothing but trouble, it's much more believable that your analysis overlooked something crucial. Markets do expand, economies do grow, and nothing characterizes our modern times more than more and different new things. The point is that the trial and error involved in their generation—like genetic mutation, gene flow, and drift in evolution—set the stage for adaptive selection. This view of markets as morally corrupt is widespread, old, and largely inaccurate. Largely, I don't blame Heying and Weinstein for these mistaken beliefs about markets, as their expertise lies in an adjacent field. They do, however, have the tools to see through their own mistake, and since they expertly wield that tool in their own field of evolution, I have lots of hope that they'll come around on this antimarket point too. This posting includes an audio/video/photo media file: Download Now |
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