Markets Are Not Gods
Table of Contents
1 I Believe In the Free Market
It's grown quite common for people in the Republican party to profess their faith in "the free market." The prattle of C-Span and talking heads drone on and on about their bourgeoisie heritage, reveling in the inanity of it all.
Left-wise partisans point out the vacuousness of these catch-phrases and talking points; careful to recant the statist rhetoric that is spoon fed to them by their authoritarian priest-kings.
Contrary to what the satirists say, Economics is not a matter of opinion. While economists are entirely likely to have opinions and even intersperse them into their professional work, the core of economics is far from subjective.
Adam Smith may have done economics a disservice by using the term "invisible hand" to describe the way people read the signals of price and apply those signals to their expertise. It does indeed paint a picture of some god-like intelligence tugging on the puppet strings that motivate our daily affairs.
Markets are a product of human interaction. They exist in any environment where people are able to communicate their subjective desires to each other. Markets are an inevitable reality. We observe them in all places; where people want a thing they do not have, they offer something to others according to their mutual subjective desires.
1.1 I Believe In Electromagnetism
Declaring disbelief in markets will not have the same effect on them as it would on Tinkerbell. Like gravity, markets will continue to operate irrespective of how or if one perceives them. Indeed, just like gravitation, if it were possible to make markets cease to exist, only the most infantile understanding of physics or economics could imagine life as even possible without them.
While state controls can blacken markets, change prices, and skew the signals that people use to measure their collective subjective values, they cannot make markets go away.
Prices are the primary means by-which people communicate the ratio of a resource's availability versus the amount of interest people have in acquiring that resource. The laws of nature are consistent and predictable to the point where people can reasonably predict the availability and value that any given resource may have to them. Around this predictability, people can build industries, create jobs, and plan for their futures.
The state, by contrast, tends to be a tumultuous being. It controls the monopoly of force and is subject to the whims of the elite few who control it (be they monarchs or elected representatives, it makes no difference). Politics, being motivated by turbulent and mutually incompatible opinions of politicians necessitates that the state is always engaged in a tug of war with itself over which way it should apply its monopoly of force.
The force of the state will apply and relieve pressure according to political tides, changing the scarcity or abundance of any given resource. What's more, they can arbitrarily change the very tools used to measure these properties of reality — making the measuring stick itself a fluctuating thing that skews and distorts everyone's ability to measure what resources are available and how fervently people want those resources.
This is not a matter of belief. This is observations. This is what we see happening with all people all the time. This is economic truth.
The opinion or belief comes in when we begin to apply judgments after this. The Keynesian believes that by changing the measuring stick that people use to quantify resource availability, people can be motivated to find the best resource allocation available to them.
1.2 Because Saint Keynes Said So
The Austrian school of economics contends that if the Keynesians were right, why are they so consistently caught off guard by the consequences of economic activity? Why do they assert that Fannie Mae and Freddie Mac is completely solvent up until moments before the crisis is declared? Why did stagflation occur in the 70's? How do they account for the Japanese "Lost Decade?" How do they prevent a repeat of Yugoslavia's mistakes? Why did the Great Depression last longer than all other market crashes before it?
Free Market advocates are not defined by the things they put their faith in. They are defined by a lack of faith in the state. They are skeptics who wonder why it is that the statist interventionist policies have failed to forsee economic problems until they are well upon us.
Declaring one's faith in the free market is quite vacuous. Just like everything else politicians do.