September 2012 — Laissez FaireLaissez Faire

The Financial Times has a surprisingly favorable review of Free Market Revolution. I say “surprising” because the Times is not exactly what you would call a free market rag.

Those looking for a fiercely uncompromising defence of free-market capitalism can do no better than consult the works of Ayn Rand. Before the Russian-born writer died in 1982, she developed a philosophy that celebrated selfishness, lauded entrepreneurs as heroes and rejected all state welfare. . . .

Yaron Brook and Don Watkins of the Ayn Rand Institute in Irvine, California, have done a good job of applying her approach to present-day conditions. Free Market Revolution is a critique of contemporary America from what Rand called an objectivist perspective.

I was particularly impressed with this paragraph, which accurately conveys a subtle but crucial point about Ayn Rand’s ethics that you’ll almost never hear in the press:

Objectivism’s starting point of selfishness is often misunderstood. In Rand’s view it did not mean setting out to harm others or be dishonest. Individuals may even decide to behave charitably at times. But to make sacrifices—or to harm yourself for the benefit of others—is foolish, from her perspective.

You can read the whole thing here (free subscription required). There were a few criticisms raised at the end, which I may try to take up later. Overall, though, the review was a pleasant surprise.

In his rewardingly positive review of Free Market Revolution, Ari Armstrong raises a few gentle criticisms. Most of them involve our failure to address certain objections to laissez-faire capitalism, such as concerns over privatizing the roads and other “public goods.”

As Armstrong suggests, we left those and many other issues unaddressed given the need to keep the book brief and focused. That’s also one of the reasons we created this blog: to elaborate on issues we didn’t have space to address in the book.

One such issue, which I wanted to address right now, is clarifying what it means to earn wealth. Here’s Armstrong:

In general, the book is written extremely clearly. The only unclear paragraph that stood out to me asserts that the “profit seeker” spurns “unearned money” (p. 77). This section fails to distinguish between legitimate gifts and winnings, such as an inheritance or a prize drawing; and illegitimate gains, such as those “mooched from overly generous relatives” (p. 77).

It’s a fair point. Our view was that the context made it clear that by “unearned money” we meant money gained through “mooching” and “looting.” We left it open whether gifts and winnings are earned.

Our answer? Yes, they are earned, but not precisely the same way a cook earns a wage by making hamburgers.

In the broadest sense, to earn money means to obtain it through production and trade—in contrast to “looting” (obtaining money by coercion) and “mooching” (obtaining money while neither producing nor offering any type of value in exchange).

Money received in the form of gifts or inheritances is also earned through an exchange of values—but here, it’s essential to understand that Ayn Rand’s “trader principle” encompasses spiritual values as well as material goods and services. For example, when a child consistently offers his parents gratitude, good will, loyalty, appreciation, and love, and as a consequence his parents remember him in their will, the child has earned that money—not economically, in the sense of a trade on the market, but morally, because the inheritance is a reward for the spiritual values only he could provide to his parents.

Money won in a prize drawing or lotto is also earned in a certain sense. Under a simple contract, your money buys a promise to pay defined amounts if your numbers are drawn. Your winnings are thus “earned” in that you produced the money for your ticket and your winnings came in trade—they were neither mooched nor looted. But there’s a subtle difference, because the winnings are actually a form of consumption, not production. Just as you might point to a statue or painting in your home and say with pride, “I earned that”—meaning that you bought it with your earnings from productive work—you’re also entitled to point to the Porsche you bought with the proceeds from your lotto ticket and say, “I earned that.”

In our book, we stressed the importance of earning because a rationally selfish person is focused on being productive, and in a division of labor context, that means: making money. Relatively speaking, dispositions of wealth through gifts or consumption are secondary issues that should not distract us from man’s primary need to produce.

Mike Slater interviewed Yaron about one of the most important elements of self-interest: self-esteem.

Free Market Revolution has made the USA Today best-selling books list. We’re at 103 in the nation. (I can’t seem to find a permalink, but for now you can see it here.) Thanks to everyone who helped make it happen.

The Los Angeles Review of Books has a tepid review of Free Market Revolution. But, hey, all publicity is good publicity. Two points worth highlighting:

For Brook and Watkins, the answer is more markets, not less, and less government, not more. They make the familiar case that rational beings pursuing their long-term self-interest are better decision-makers than a distant government filled with bureaucrats subject to distraction or corruption.

That’s not our argument. Our argument is that each individual has a right to exist for his own sake, and that the government exists to protect that right. No bureaucrat, no politician, no mob carrying the banner of “the public interest” has a right to impose its will on the individual by force.

Even someone as repeatedly amazed by the power of the market to allocate scarce resources, drive innovation to unimagined heights, and ensure the continued production and distribution of increasing varieties of goods and services, as indeed I am, does not necessarily need to look to capitalism for a philosophy that can be applied across the range of all human endeavors.

The market doesn’t explain why I love my three mischievous and exhausting children so much. It doesn’t explain why I find bonfires at the beach so aesthetically fulfilling. And most importantly, it doesn’t explain why the best comedy to ever run on American broadcast television—namely “Arrested Development”—was cancelled after just three seasons.

For these important issues (and countless more), we must look elsewhere.

I don’t get the line about Arrested Development (although I share the reviewer’s consternation at its cancellation) but his general point about our book is clear: we say that a philosophy of capitalism is a sufficient guide to life, but it isn’t.

Except we don’t say that. In fact, what we say is quite the opposite. We have an entire chapter on ethics, and about the moral principles a human being needs to pursue and achieve his own happiness. Our point about capitalism is that it’s the only system that leaves the individual fully free to live according to those principles. We’re also clear that we only touch on ethics, and that Rand’s work contains an entire philosophy of life: a philosophy that does help answer questions such as the basis for love and affection and for esthetic enjoyment.

As we put it in the Introduction, “This book is written from the perspective of Ayn Rand’s philosophy, and all of the philosophic ideas in it are hers. . . . But the focus of the book is not Rand’s philosophy as a whole but one element of it: her moral defense of free markets.”

The point I want to emphasize is that, although Free Market Revolution is about Rand’s political philosophy, Rand was not primarily a political philosopher. She was a philosopher, concerned primarily with the question of what kind of life the individual should live. Politics and economics were, for her, important but derivative issues. In short, her ethics of rational self-interest was not a rationalization for capitalism—she embraced capitalism because she believed in rational self-interest.