Question for libertarians

[Redshirt]

It's not my intention to start a libertarian bashing thread here. I just wanted the libertarians present to reflect on a question I have.

Has the economic crisis perhaps shaken your faith a little in Friedmanite/free market/laissez faire ideological values and principles? Have you since adjusted your ideology a bit to the left in some ways? Alan Greenspan seems to have developed an epiphany of sorts. For instance:

The Education of Alan Greenspan (http://www.huffingtonpost.com/donald-cohen/the-education-of-alan-gre_b_139115.html)

Greenspan 1963: Writing in Ayn Rand's Objectivist Newsletter, Greenspan declared as myth the idea that businessmen "would attempt to sell unsafe food and drugs, fraudulent securities, and shoddy buildings. It is in the self-interest of every businessman to have a reputation for honest dealings and a quality product."

Greenspan 2008: Testifying before the House Committee on Oversight and Government Reform, Greenspan recanted: "Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief.... This modern [free market] paradigm held sway for decades. The whole intellectual edifice, however, collapsed in the summer of last year."

Greenspan's life spanning quotes are the bookends of the dramatic ascendance, dominance and ultimately demise of the radical right's unquestioning faith in unfettered free markets.

[Preno]

in before the crisis is the result of socialism/statism

[Stout Drinker]

For a number of years I called myself a libertarian.

I voted for Harry Browne for president in 1996 and 2000. However in 2000 I did prefer Bush over Gore because of the 'humble' foreign policy approach articulated by then Governor Bush. I'm glad at least that I didn't vote for him.

I donated and volunteered to the Ron Paul campaign early on mainly because of his antiwar stance. I did like his limited government action as well but wasn't on board with abolishing the fed.

When the primary came up I voted for Obama over Hillary and voted for Obama for president.

For president in '04 I did vote for Kerry over Bush due to the Iraq war.

However I was never a 'pure' libertarian. I was really disaffected and that was my way of voting for 'none of the above'. Of the third parties I would take the libertarians over the socialists, fascists, communists, or greens. I did tend to believe that markets were more rational and that owners were the best in determining risk.

I would say that the current financial crisis has altered a lot of what I think. There has to be some controls on financial behaviors and merely allowing the 'owners' to determine a course of action does not work for me. There has to be some sort of control and limits on corporate power other than the sharehholders. Also governmental action is needed to cushion the fall and provide for some sort of safety net. I'm not sure of how best to do that though.

Redshirt, I will forward your questions onto a friend of mine from college. He was always much more ideological than me and is still libertarian. I doubt he will post here though. He is a very conservative catholic partially due to me. He is also busy with his job and four children. He was a lukewarm protestant when we we were in college but due to the influence of me, a couple of other friends, and his wife he became an ultra conservative catholic. Recently though he was telling me that he was questioning Catholicism because he hates authority. He reconciles the differences with alcohol.

[JamesBannon]

The libertarian idea of free markets is, and always was, a bunch of nonsense. To be quite frank, no-one has any real idea at all of how markets actually function. At best we might say they're chaotic, and that's at best. Added to that, the "trickle-down" idea, first mooted by Friedman and since taken up by a variety of pundits, is absolute bullshit. It has no empirical support at all, yet we still hear it being spoken of as some sort of "holy grail" of economic theory (which itself is a laughable contradiction in terms). On the other hand, the "planners" are just as dumb as the libertarians!

[Alex]

Whether you're talking about free markets infested by libertarians with laissez-faire "principles" or a command economy run by a nomenklatura, when you factor in natural graft and greed then sooner or later you'll end up with an economic meltdown.

[Eudaimonist]

I sense libertarian-bashing arriving despite the request of the OP, but I'll offer this quick response.

Has the economic crisis perhaps shaken your faith a little in Friedmanite/free market/laissez faire ideological values and principles?

Which values and principles are you referring to? I was never a "Friedmanite".

Anyway, my rational convictions have not been shaken because I was never devoted to the idea that markets are recession-proof. I also never shared Greenspan's conviction that the self-interest of lending institutions would necessarily prevent economic problems.

Besides, my support for free markets arises far more from ethical and political philosophy considerations than economic theory. I support free markets because I see them as morally just and as part of the social conditions that make individual flourishing possible. Recessions, while inconvenient, do not automatically make leftist policies desirable.

Have you since adjusted your ideology a bit to the left in some ways?

Not really, unless you count as leftist the idea that the government is entitled to require by law a certain transparency in the economic activities of critical institutions, such as banks.

While this view might not be shared by all libertarians or other advocates of laissez-faire capitalism, I don't see how this is actually a shift to the left, since this sort of policy does not involve economic engineering, at least as I understand the term.


eudaimonia,

Mark

[Harry Bosch]

I sense libertarian-bashing arriving despite the request of the OP, but I'll offer this quick response.

Has the economic crisis perhaps shaken your faith a little in Friedmanite/free market/laissez faire ideological values and principles?

Which values and principles are you referring to? I was never a "Friedmanite".

Anyway, my rational convictions have not been shaken because I was never devoted to the idea that markets are recession-proof. I also never shared Greenspan's conviction that the self-interest of lending institutions would necessarily prevent economic problems.

Besides, my support for free markets arises far more from ethical and political philosophy considerations than economic theory. I support free markets because I see them as morally just and as part of the social conditions that make individual flourishing possible. Recessions, while inconvenient, do not automatically make leftist policies desirable.
Have you since adjusted your ideology a bit to the left in some ways?

Not really, unless you count as leftist the idea that the government is entitled to require by law a certain transparency in the economic activities of critical institutions, such as banks.

While this view might not be shared by all libertarians or other advocates of laissez-faire capitalism, I don't see how this is actually a shift to the left, since this sort of policy does not involve economic engineering, at least as I understand the term.


eudaimonia,

Mark
Very well said.

[JamesBannon]

Good grief! There is no morality in free market economics. It is perfectly possible to have a free market in which 90% of people are living in abject poverty with no education, health care or other amenities. Is that moral?

[Philosophickle]

It's not my intention to start a libertarian bashing thread here. I just wanted the libertarians present to reflect on a question I have.

Has the economic crisis perhaps shaken your faith a little in Friedmanite/free market/laissez faire ideological values and principles? Have you since adjusted your ideology a bit to the left in some ways? Alan Greenspan seems to have developed an epiphany of sorts. For instance:

The Education of Alan Greenspan (http://www.huffingtonpost.com/donald-cohen/the-education-of-alan-gre_b_139115.html)

Greenspan 1963: Writing in Ayn Rand's Objectivist Newsletter, Greenspan declared as myth the idea that businessmen "would attempt to sell unsafe food and drugs, fraudulent securities, and shoddy buildings. It is in the self-interest of every businessman to have a reputation for honest dealings and a quality product."

Greenspan 2008: Testifying before the House Committee on Oversight and Government Reform, Greenspan recanted: "Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief.... This modern [free market] paradigm held sway for decades. The whole intellectual edifice, however, collapsed in the summer of last year."

Greenspan's life spanning quotes are the bookends of the dramatic ascendance, dominance and ultimately demise of the radical right's unquestioning faith in unfettered free markets.

In short, no. We don't have a free market, and Greenspan, despite his cultish obsession with Rand, was no libertarian. I can't even make sense of a libertarian in charge of the federal reserve. It's laughable.

Good grief! There is no morality in free market economics. It is perfectly possible to have a free market in which 90% of people are living in abject poverty with no education, health care or other amenities. Is that moral?

Yes.

[JamesBannon]

It's moral to have people starving? I guess it's also moral for people to sell their children into slavery to clear off their debt!

[Philosophickle]

It's moral to have people starving?

I'm not sure what you mean by "have people starv"e, but if someone wants to starve I don't have the moral obligation to stop them. People don't have innate rights to things that aren't theirs.

I guess it's also moral for people to sell their children into slavery to clear off their debt!

No, because slavery is immoral.

[Harry Bosch]

It's moral to have people starving? I guess it's also moral for people to sell their children into slavery to clear off their debt! You're equating a Muslim dictatorship to a libertarian country?

[dancer_rnb]

It's moral to have people starving? ........

You've lived in a rich culture too long. If there is not enough food to go around, people WILL starve.

You need to put limitations/initial conditions on this argument to make it valid.

[JamesBannon]

It's moral to have people starving? ........

You've lived in a rich culture too long. If there is not enough food to go around, people WILL starve.

You need to put limitations/initial conditions on this argument to make it valid.

And it's not about "enough to go around". I wonder why libertarians haven't figured that out yet.

[JamesBannon]

It's moral to have people starving?

I'm not sure what you mean by "have people starv"e, but if someone wants to starve I don't have the moral obligation to stop them. People don't have innate rights to things that aren't theirs.

I guess it's also moral for people to sell their children into slavery to clear off their debt!

No, because slavery is immoral.

People don't have "innate rights" - period! Another myth. Human rights are invented by, and for the use of, human beings. I see no reason why people should starve to satisy some libertarian pipe dream. And please don't give me that shit about "choosing" to starve. That sort of canard makes me heave.

[JamesBannon]

No, because slavery is immoral.
Why? If people "freely trade" others, why is it immoral to do so?

[Philosophickle]

It's moral to have people starving? ........

You've lived in a rich culture too long. If there is not enough food to go around, people WILL starve.

You need to put limitations/initial conditions on this argument to make it valid.

And it's not about "enough to go around". I wonder why libertarians haven't figured that out yet.

What is it about?

It's moral to have people starving?

I'm not sure what you mean by "have people starv"e, but if someone wants to starve I don't have the moral obligation to stop them. People don't have innate rights to things that aren't theirs.

I guess it's also moral for people to sell their children into slavery to clear off their debt!

No, because slavery is immoral.

People don't have "innate rights" - period! Another myth. Human rights are invented by, and for the use of, human beings. I see no reason why people should starve to satisy some libertarian pipe dream. And please don't give me that shit about "choosing" to starve. That sort of canard makes me heave.

If there aren't any such things as rights, then why are you so concerned about starving people? Fuck em, right?

[JamesBannon]

I'm grouchy, so I'll get back to you later on this. I just want to make one point.

I was responding to the use of the word "innate". There is no such thing as an "innate right" - that's a fallacy (the naturalistic fallacy). Human rights are no more "natural" than any other human edifice. They are a device that enables humans to live in communities in a, relatively, harmonious way. Like any human artefact, they are constructed, not innate. You might as well argue that a spear is "innate" to humans when it is nothing of the kind.

[Alex]

No modern economy is allowed to operate on unrestricted free market principles. All (western) governments intervene to mitigate the hardship and exploitation of workers that will occur under "pure" capitalist conditions. The crucial questions that are argued about are when, where, and how much state intervention is justified.

Without some humane regulation of the free market, Victorian sweatshops would still be ubiquitous and women and children would probably still toil in the mines.

[dancer_rnb]

There is no such thing as a free market.

[dancer_rnb]

It's moral to have people starving? ........

You've lived in a rich culture too long. If there is not enough food to go around, people WILL starve.

You need to put limitations/initial conditions on this argument to make it valid.

And it's not about "enough to go around". I wonder why libertarians haven't figured that out yet.

I just wanted to note your assumptions, James. One of which is a global surplus of food. Historically it wasn't that long ago that famines still occurred due to bad weather.

Also, isn't one of the reasons global warming is feared is that it will disrupt food production?

[Alex]

There is no such thing as a free market.

A market in which distribution and exchange are outside the control of the state and which are allowed to proceed according to private agreements can be described as "free".

Like all freedoms this one also is a matter of degree rather than an absolute condition.

[JamesBannon]

You've lived in a rich culture too long. If there is not enough food to go around, people WILL starve.

You need to put limitations/initial conditions on this argument to make it valid.

And it's not about "enough to go around". I wonder why libertarians haven't figured that out yet.

I just wanted to note your assumptions, James. One of which is a global surplus of food. Historically it wasn't that long ago that famines still occurred due to bad weather.

Also, isn't one of the reasons global warming is feared is that it will disrupt food production?
I know that Dancer. It just annoys the hell out of me when people start with the "morality of free markets" nonsense. If people want to see what a "real" free market is like, they should be slaving in a sweat shop for 14 hours / day for less than $2 / day. I think that would cure them of any romantic clap-trap about the morality of free markets!

In so far as the production of food is concerned, I find it difficult to believe that there is a "global shortage" when governments dump perfectly good grain in order to keep the prices up for their own farmers. I also find it difficult to believe when companies that produce genetically modified crops deliberately make them sterile to force farmers to buy seed every cycle.

[premjan]

I think GM crops not being able to reproduce naturally is a trust issue, the government can weigh in on that.

[JamesBannon]

Perhaps, premjan, but will they? I rather doubt it since it's in the community's interest to have it that way (more profit).

[Aside: The reason we don't do genetically modified food crops here is because of prejudice, nothing whatever to do with the science. I always find it amusing that people who moan about it are perfectly happy to eat a banana - a product of artificial selection, and, hence, genetic modification].

[premjan]

It isn't about the plant not being able to reproduce as an abstract matter, it is about the farmers not being able to use the seed next year as they are accustomed to. It may go against service of the customer and lean too far towards profit (which I suppose is what underlies trust). An individual government can weight to what extent it needs GM and regulate what kinds of GM can be sold within it.

[dancer_rnb]

There is no such thing as a free market.

A market in which distribution and exchange are outside the control of the state and which are allowed to proceed according to private agreements can be described as "free".

Like all freedoms this one also is a matter of degree rather than an absolute condition.

Free market is usually stated to include more than that.

[Christina]

Most of the complaining out here comes from organic farmers who were there first that can't keep their organic certifications because the pollen from the genetically altered crops pollinates their fields as well. It's destroying their livelihood because there's no management plan to keep the big agribusiness companies from surrounding the smaller farmers. It's not an easy issue to resolve because obviously the organic farmers aren't in a position to compete with or replace the function of the huge companies.

[Alex]

There is no such thing as a free market.

A market in which distribution and exchange are outside the control of the state and which are allowed to proceed according to private agreements can be described as "free".

Like all freedoms this one also is a matter of degree rather than an absolute condition.

Free market is usually stated to include more than that.

If you think my description of the free market is inadequate, then instead of a one line dismissal perhaps you could improve on it by stating your own?

[dancer_rnb]

http://http://en.wikipedia.org/wiki/Free_market (http://en.wikipedia.org/wiki/Free_market)

Note the part of being free from coercion by anyone.

Add; I see I was also thinking of a "perfect" market

[BioBeing]

[Aside: The reason we don't do genetically modified food crops here is because of prejudice, nothing whatever to do with the science. I always find it amusing that people who moan about it are perfectly happy to eat a banana - a product of artificial selection, and, hence, genetic modification].

Blasphemer! Bananas were made perfect by God, and are proof of his existence! They are the atheists worst nightmare, don't you know!?!!??

[Alex]

http://http://en.wikipedia.org/wiki/Free_market (http://en.wikipedia.org/wiki/Free_market)

Note the part of being free from coercion by anyone.

Add; I see I was also thinking of a "perfect" market

I expected a description in your own words rather than a link to an entry in an encyclopaedia. However, I think even my brief description of the free market implied absence of coercion.

The operation of supply and demand is built into the concept of a market. If that operation is "rigged" by its participants or controlled by the government, then you don't have a market. A situation in which the trading of commodities is regulated by a co-operative economic arrangement or by government decree - perhaps in order to promote mutual advantage or to restrict competition - isn't a market.

[JamesBannon]

http://http://en.wikipedia.org/wiki/Free_market (http://en.wikipedia.org/wiki/Free_market)

Note the part of being free from coercion by anyone.

Add; I see I was also thinking of a "perfect" market

Again, I note in the Wikipedia article some misunderstanding of Adam Smith and his connection with "Libertarian ideals". A careful reading of The Wealth of Nations, and his other works on Political Economy, indicate clearly that Adam Smith was not in favour of what most Libertarians think he was in favour of. E.g., he was against the Tories (unlike Hume) and was in favour of state-funded education, medicine and transport. Not particularly Libertarian of him!

On the other hand, the "left radicals", especially those of the "Platonic" variety, are just as nuts as the Libertarian right. Experience has shown throughout human history, that humans will trade regardless of what "idealists" think of the nature of private property. Besides which, actually planning to cater for all human needs is another pipe dream. It is simply not possible to do that in the way the Platonists think.

[dancer_rnb]

http://http://en.wikipedia.org/wiki/Free_market (http://en.wikipedia.org/wiki/Free_market)

Note the part of being free from coercion by anyone.

Add; I see I was also thinking of a "perfect" market

I expected a description in your own words rather than a link to an entry in an encyclopaedia. However, I think even my brief description of the free market implied absence of coercion.

The operation of supply and demand is built into the concept of a market. If that operation is "rigged" by its participants or controlled by the government, then you don't have a market. A situation in which the trading of commodities is regulated by a co-operative economic arrangement or by government decree - perhaps in order to promote mutual advantage or to restrict competition - isn't a market.

Why recreate the wheel?

I don't think you can have a real economic system where coercion will not arise, due to human nature.

[Alex]

The Wealth of Nations isn't just an "classic" economics text that analyses the causes of prosperity; it's also a treatise about the struggle for individual liberty.

It should be studied in conjunction with The Theory of Moral Sentiments to get the essence of Adam Smith's thought.

[Alex]

Why recreate the wheel?
Why make any arguments of your own when you can simply give links to articles in encyclopaedias?
I don't think you can have a real economic system where coercion will not arise, due to human nature.

That point was also implied in my remark about the the "freedom" of markets being a matter of degree rather than an absolute condition.

[Philosophickle]

I was responding to the use of the word "innate". There is no such thing as an "innate right" - that's a fallacy (the naturalistic fallacy). Human rights are no more "natural" than any other human edifice. They are a device that enables humans to live in communities in a, relatively, harmonious way. Like any human artefact, they are constructed, not innate. You might as well argue that a spear is "innate" to humans when it is nothing of the kind.

That's your assertion.
It certainly isn't the naturalistic fallacy.I don't think you understand what that fallacy is. Have you read G. E. Moore?



And it's not about "enough to go around". I wonder why libertarians haven't figured that out yet.

I just wanted to note your assumptions, James. One of which is a global surplus of food. Historically it wasn't that long ago that famines still occurred due to bad weather.

Also, isn't one of the reasons global warming is feared is that it will disrupt food production?
I know that Dancer. It just annoys the hell out of me when people start with the "morality of free markets" nonsense. If people want to see what a "real" free market is like, they should be slaving in a sweat shop for 14 hours / day for less than $2 / day. I think that would cure them of any romantic clap-trap about the morality of free markets!

Sweat shops are one of the greatest steps of a industrializing nation. Many people in the poorest countries wish they could work in sweat shops.

In so far as the production of food is concerned, I find it difficult to believe that there is a "global shortage" when governments dump perfectly good grain in order to keep the prices up for their own farmers. I also find it difficult to believe when companies that produce genetically modified crops deliberately make them sterile to force farmers to buy seed every cycle.

Are you suggesting this is an invention of the market? I'm of the opinion the state is responsible for the destruction of product in order to set prices, not the market (unless there were a monopoly, but the market has ways of fixing that).


Why recreate the wheel?
Why make any arguments of your own when you can simply give links to articles in encyclopaedias?
I don't think you can have a real economic system where coercion will not arise, due to human nature.

That point was also implied in my remark about the the "freedom" of markets being a matter of degree rather than an absolute condition.

Either you are coerced in a business exchange or you are not. The matter of degrees only comes into play when you consider all business transactions and take some kind of statistical average. But there aren't degrees of freedom.

[JamesBannon]

Sweat shops are one of the greatest steps of a industrializing nation. Many people in the poorest countries wish they could work in sweat shops.
Piffle! I'll bet you wouldn't work in a sweat shop for 14 hours & $2 / day (that's average BTW). It is nothing more than indentured servitude, the rest is relativistic bullshit designed to justify treating people like slaves.

Are you suggesting this is an invention of the market? I'm of the opinion the state is responsible for the destruction of product in order to set prices, not the market (unless there were a monopoly, but the market has ways of fixing that).
The market does not invent anything. You have it ass backwards. Markets are composed of people playing games and acting in a restricted information and imbalanced economic power environment. There is nothing "free" about that!

[nygreenguy]

Sweat shops are one of the greatest steps of a industrializing nation. Many people in the poorest countries wish they could work in sweat shops.
Exactly. See, when people are desperate, they will do practically anything to get by. Now, these companies know this so this is why they pay so little and have such shitty working conditions.Theres a term for when companies are taking advantage of peoples misfortune to their benefit, its called exploitation. Just because people WILL do it, doesnt mean it should be done.

Now, america became a great country because of our free labor. No one can doubt this. But just because the ends were good, it doesnt mean the means are justified.

[lpetrich]

I've noticed that many pro-capitalist ideologues have a fondness for defending sweatshop conditions and other forms of exploitation, but I've also noticed that their defense of sleazy third-world business practices usually does not extend to defense of the widespread software and music and movie piracy in third-world countries.

[premjan]

It is really the job of governments in those countries to restrict the use of sweatshops. One could require that so-called sweatshop operations be certified by the host countries. As for piracy, the name indicates it is not the same as theft.

[JamesBannon]

Meh ... I don't give a rats ass about "piracy" or so-called "software copyright violation". To me industrial copyright is just another form of protectionism.

[Alex]

Either you are coerced in a business exchange or you are not. The matter of degrees only comes into play when you consider all business transactions and take some kind of statistical average. But there aren't degrees of freedom.

Can you give an example of being coerced into a business transaction that could take place in a free market?

I'm "coerced" into buying my domestic water from a particular source because there's no other choice. In other words, the water supply is in the hands of a monopoly. If there was a free market in water, I'd search for the cheapest deal I could find.

If you generalize this sort of consideration, it's an argument for the protection of the consumer's interest - i.e. the freedom to choose. Coercion, in this narrow sense, is something that state regulation is supposed to outlaw.

[Philosophickle]

Either you are coerced in a business exchange or you are not. The matter of degrees only comes into play when you consider all business transactions and take some kind of statistical average. But there aren't degrees of freedom.

Can you give an example of being coerced into a business transaction that could take place in a free market?

I'm "coerced" into buying my domestic water from a particular source because there's no other choice. In other words, the water supply is in the hands of a monopoly. If there was a free market in water, I'd search for the cheapest deal I could find.

If you generalize this sort of consideration, it's an argument for the protection of the consumer's interest - i.e. the freedom to choose. Coercion, in this narrow sense, is something that state regulation is supposed to outlaw.

You aren't coerced into buying your water from your water company. You could purchase water bottles or dig your own well.

[Philosophickle]

Sweat shops are one of the greatest steps of a industrializing nation. Many people in the poorest countries wish they could work in sweat shops.
Piffle! I'll bet you wouldn't work in a sweat shop for 14 hours & $2 / day (that's average BTW). It is nothing more than indentured servitude, the rest is relativistic bullshit designed to justify treating people like slaves.

I wouldn't work in a sweatshop now because I am employed at a much higher wage. But in countries where expenditures are significantly less and employment is hard to come by I would certainly take the job.
This is why the actually sweatshop laborers are never the ones to complain about the working conditions. In some countries- like the Honduras- sweatshops (Nike in particular) provide massive economic relief to people that would otherwise be scrounging through the garbage.

The market does not invent anything. You have it ass backwards. Markets are composed of people playing games and acting in a restricted information and imbalanced economic power environment. There is nothing "free" about that!

Of course there is. A free marketplace is a dynamic marketplace, and one that is able to respond to the constantly shifting needs of the global community.

Exactly. See, when people are desperate, they will do practically anything to get by. Now, these companies know this so this is why they pay so little and have such shitty working conditions.Theres a term for when companies are taking advantage of peoples misfortune to their benefit, its called exploitation. Just because people WILL do it, doesnt mean it should be done.

Now, america became a great country because of our free labor. No one can doubt this. But just because the ends were good, it doesnt mean the means are justified.

Are you suggesting companies ought to pay their employees more than the employees will work for? That is bad business. Actually, what happens is the sweatshops bring up the purchasing power of its laborers and allows them to improve their own living conditions by purchasing from foreign and domestic producers. When they buy foreign, it means foreigners have their currency and must, of necessity, put that money back into the economy which stimulates the exports of the sweatshop country. When the purchases are from domestic producers, it causes a general rise in wealth from lower unemployment.

Eventually, the sweatshop will become outdated and be either close or be forced to offer competitive wages. This happened in Southeast Asia and it eventually happens to all significantly free economies.

[Alex]

You aren't coerced into buying your water from your water company. You could purchase water bottles or dig your own well.

This isn't a serious response. The next thing you could say is that I could lay my own pipe line and get an independent gas supply from under the North Sea. The point I made was about the power of a monopoly in a public utility.

Why haven't you addressed my question about your allegation that business transactions might be "coerced" in a free market?

[boneyard bill]

How does any get the idea that repealing a few of the thousands of laws regulating our economy somehow produces a free market? We don't have a free market now, and we never have had one. However, we once had a much freer market than we have today. So why would anyone who supports free market principles be disillusioned after seeing how our regulators have fucked things up once again?

[muidiri]

It's not my intention to start a libertarian bashing thread here. I just wanted the libertarians present to reflect on a question I have.

Has the economic crisis perhaps shaken your faith a little in Friedmanite/free market/laissez faire ideological values and principles? Have you since adjusted your ideology a bit to the left in some ways? Alan Greenspan seems to have developed an epiphany of sorts. For instance:

The Education of Alan Greenspan (http://www.huffingtonpost.com/donald-cohen/the-education-of-alan-gre_b_139115.html)

Greenspan 1963: Writing in Ayn Rand's Objectivist Newsletter, Greenspan declared as myth the idea that businessmen "would attempt to sell unsafe food and drugs, fraudulent securities, and shoddy buildings. It is in the self-interest of every businessman to have a reputation for honest dealings and a quality product."

Greenspan 2008: Testifying before the House Committee on Oversight and Government Reform, Greenspan recanted: "Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief.... This modern [free market] paradigm held sway for decades. The whole intellectual edifice, however, collapsed in the summer of last year."

Greenspan's life spanning quotes are the bookends of the dramatic ascendance, dominance and ultimately demise of the radical right's unquestioning faith in unfettered free markets.

I consider myself to be a libertarian, although I didn't know the term even existed (or that there was any sort of organization to it) until I stumbled upon IIDB a few years back.

The short answer is: No. It hasn't shaken my "faith". There's not really any faith involved though.

For starters, the market wasn't exactly free - the fed has been monkeying with the money system for a long while, manipulating interest rates etc. And it's not exactly unregulated either - there may not have been as much regulation as many people would like, and some of the regulations that do exist are (if you're honest) just bad regulations. So I tend to take the whole system with a grain of salt.

Secondly, and perhaps more importantly, is that I would never have expected a free market to be fail-safe. It's always going to have independent players... and they will always be making their decisions based on their expectations of the future. Sometimes they're going to be wrong, and things are going to suck. This is true of just about everything in life though - just look at the history of science! how many times has a theory been accepted as absolutely true... only to later be found to be quite wrong? It's trial and error, and economics is certainly not going to be immune from failure.

We got to this point for a handful of reasons. One of them is the whole Credit Default Swap bit - they were poorly understood, and highly risky. But lots of people forgot that a large expected return on an investment is a direct measure of how risky it is - it's essentially a proxy for the likelihood of the investment failing altogether. So there was a lot of downright stupid investing going on.

Another big piece of the problem is debt, and the environment that has been fostered around it. The ease with which debt was available, and the amount of leveraging carried by both individuals and companies was just dumb, IMO. Someone somewhere sat down and did some math... and said "Hey, if we borrow at a lower rate than we earn, we can get an even bigger bang for our buck" and everyone just jumped on the bandwagon. They left all common sense behind - even the government has a totally ridiculous amount of debt! This fostered an entire country with a very unhealthy view of debt. Everyone seemed to forget to stop and ask "What if?", so the failed to plan and reserve for the contingencies.

All in all, people forgot that there is a price to risk. This, IMO, is at the heart of the current economic situation.

I think the bailout is an abysmal idea. If a model doesn't work... you don't keep throwing resources at it to keep it going. You either fix the model or you build a new one. It's like we're in a sinking boat that a quarter mile off the coast of a well developed civilization. The boat has so many holes, that everyone has to man their bucket contantly, just to stay afloat. Everybody's so busy bailing out the boat that there's nobody there to steer... so it's just drifting away, out of control, on the tide. Nobody has given any though to just letting the boat sink and swimming ashore. Sure it's going to be cold and wet, and there's a chance that some people might not make it. But if we cooperate and help out those who don't swim very well, it's reasonably likely that we'll all get to shore - then we can build a better boat.

I don't know. Failure is not necessarily a bad thing in the long run. We can't regulate everything. We're well on our way to getting the system locked up so tightly that nothing can ever change... and change is a good thing most of the time. As a country, it seems like we're trying to prevent anything bad from ever happening - ever!!!!! And this just doesn't work very well. Instead of building dozens of leaky dams to make sure that there's never a flood ever again... why don't we just wise up and not build huge cities in flood plains?

Meh... I'm done with my rant now :p

[Preno]

Instead of building dozens of leaky dams to make sure that there's never a flood ever again... why don't we just wise up and not build huge cities in flood plains?What does that actually mean in economic terms?

[muidiri]

Besides, my support for free markets arises far more from ethical and political philosophy considerations than economic theory. I support free markets because I see them as morally just and as part of the social conditions that make individual flourishing possible. Recessions, while inconvenient, do not automatically make leftist policies desirable.

This is really well stated.

[muidiri]

Instead of building dozens of leaky dams to make sure that there's never a flood ever again... why don't we just wise up and not build huge cities in flood plains?What does that actually mean in economic terms?

Nothing specific - I don't have a grand plan. In general, it means that when something we've tried (such as tons of debt and poorly understood derivatives) results in something really bad happening... the appropriate response, from my point of view, is to stop doing the thing that didn't work. Learn the lesson - reduce the debt level, and learn more about the derivatives you're using... and consider that those derivatives may not be the best solution for the situation. IMO, the solution is NOT to just pour more money into something that didn't work, in hopes that if we feed it enough it will somehow become viable. Hell - instead of accepting the consequences of ridiculous levels of debt and reducing our leverage... we're being incentivized to continue spending beyond our means in order to keep doing the same things that already failed. To me, it seems sophomoric to believe that throwing some regulations at the system will prevent a future failure. The only thing that can mitigate (not fully prevent) future failures, is to learn from our mistakes.

[Preno]

IMO, the solution is NOT to just pour more money into something that didn't work, in hopes that if we feed it enough it will somehow become viable.What do you mean by "something"? The banks? Are you saying that banks don't work? :dunno:

[muidiri]

IMO, the solution is NOT to just pour more money into something that didn't work, in hopes that if we feed it enough it will somehow become viable.What do you mean by "something"? The banks? Are you saying that banks don't work? :dunno:

:hmm: I thought from my post it was pretty clear that I was talking about the combination of ridiculously unsustainable debt levels and poorly understood derivative products.

[Preno]

I wasn't aware that someone is pouring money into "ridiculously unsustainable debt levels and poorly understood derivative products". What does it even mean to pour money into unsustainable debt levels?

[JamesBannon]

It means the banks oversold debt and hence increased their leverage to unsustainable levels (for which the big bosses got massive payoffs). Now, when the bubble gets pricked, it's ordinary borrowers & lenders who have to pay the piper by bailing out the banks. The question is which is worse: the bail-out or letting ordinary borrowers & lenders suffer the consequences of poor financial decision-making on the part of the bankers.