What Markets Ain’t
Ayn Rand published one book specifically on capitalism, calling it Capitalism: The Unknown Ideal. She titled the most important essay in the book “What Is Capitalism?” One of her deepest insights was that capitalism is being abandoned and destroyed in large measure because people do not understand what capitalism is.
Markets Gone Amok?
To see how this plays out in practice, see Nicholas Kristof’s recent column, “Markets and Morals,” in the New York Times. Kristof is touting a new book by Michael Sandel, What Money Can’t Buy. Kristof views Americans as consumed by a “laissez-faire” ideology that has led us to allow markets where we ought not. He cites some examples from Sandel’s book, including:
Should the United States really sell immigration visas? A $500,000 investment will buy foreigners the right to immigrate.
Should Massachusetts have gone ahead with a proposal to sell naming rights to its state parks? The Boston Globe wondered in 2003 whether Walden Pond might become Wal-Mart Pond.
Some things simply shouldn’t be for sale, Kristof says, and so we have to stop this knee-jerk embrace of markets, what he labels “market fundamentalism.” “Market fundamentalists . . . accept that laissez-faire is always optimal.”
Yet, he concludes, laissez-faire clearly isn’t always optimal:
[A]nyone who honestly believes that low taxes and unfettered free markets are always best should consider moving to Pakistan’s tribal areas. They are a triumph of limited government, negligible taxes, no “burdensome regulation” and free markets for everything from drugs to AK-47s.
We can sum up Kristof’s argument this way. A market exists whenever and wherever there is buying and selling going on. Laissez-faire capitalism is the idea that everything should be up for auction, that there should be no laws interfering with buying and selling in any way. It is, in short, anarchy. Since anarchy is obviously bad, the regulatory state is obviously good—it’s just a matter of finding the right mix of markets and government intervention into the economy.
What Capitalism Is
There is one concept that is strikingly absent from Kristof’s account: individual rights. To be fair to him, it is absent from most accounts—even many alleged defenses of free markets. But Rand argued that you cannot even understand what capitalism is absent the concept of individual rights.
Check out her approach and see how it clarifies this whole matter in a way that doesn’t unleash arbitrary line-drawing about where to “place some boundaries on markets.”
“Capitalism,” writes Rand, “is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.” She goes on to elaborate:
The recognition of individual rights entails the banishment of physical force from human relationships: basically, rights can be violated only by means of force. In a capitalist society, no man or group may initiate the use of physical force against others. The only function of the government, in such a society, is the task of protecting man’s rights, i.e., the task of protecting him from physical force; the government acts as the agent of man’s right of self-defense, and may use force only in retaliation and only against those who initiate its use; thus the government is the means of placing the retaliatory use of force under objective control.
Note some implications.
- Capitalism is not anarchy. It requires a strong, active government to ensure that individual rights are protected from violation by force or fraud. Lawless areas like those in Pakistan are not illustrative of laissez-faire.
- A free market is not one free from government but free from the initiation of force—the government’s or anyone else’s. Under laissez-faire capitalism, there is a clear distinction between crime and commerce. If you’re violating someone’s rights, your activity is not protected simply because you’re engaging in an act of buying or selling. So you can’t hire a hit man to take out your boss on the excuse that it’s “free commerce.”
- Much of what the government is selling today would not be for sale in a capitalist society. There would be no state parks and so no park naming rights to be sold. Immigration would be open, and thus there would be no opportunity for government to auction off visas.
- In a free market people would be able to buy and sell some things you may not approve of—drugs, unpopular political books, sugary sodas. You don’t have to like it—you can even denounce and boycott it—but you can’t impose your values on others any more than they can impose their values on you. That’s the meaning of freedom.
The Bottom Line
Kristof is arguing against a straw man. He’s saying: Clearly we need laws, not everything should be for sale, therefore laissez-faire capitalism is bad and the regulatory state is good.
But laissez-faire capitalism has laws, including laws that ban buying or selling things like military-grade weapons. It is not a free-for-all, but a system that removes force from human affairs so that all relationships are voluntary.
Let Kristof and other critics of laissez-faire argue against that.
20 Comments to “What Markets Ain’t”
I’ve raised this issue with people who had similar views to Kristof, and the reply I typically get back is: “That’s just Ayn Rand’s opinion (of what capitalism is)”
If not that, then they quote the dictionary definition of capitalism, stating that “it’s simply a system in which the means of production are privately owned”, and then they argue that anything beyond that definition is irrelevant because it’s conjecture.
How would you fight against such retorts?
For Kristof, the issue is that he equates laissez-faire with anarchy, not even acknowledging that possibility of a government that protects individual rights. That’s not really a definitional issue. What you’re saying in effect is: you’re offering us two choices, anarchy or the regulatory state of today, but you’re leaving out this other possibility.
What you’re talking about is more difficult: arguing that capitalism *means* laissez-faire capitalism. You’re trying to tell people, don’t call what we have today capitalism. The key point is focus on the facts, not the words. What they need to grasp is that today government is intervening in our economic affairs in all sorts of ways, and that there could be a scenario in which it didn’t do that. It’s at that point that a distinction between capitalism and the mixed economy becomes meaningful.
Good point. Also, those who say “That’s just Ayn Rand’s opinion (of what capitalism is)” are left to define what “type” of capitalism they object to. If not Rand’s, then whose? If they mean George Bush’s or Mitt Romney’s “capitalism,” then they are even LESS justified in their analogy with lawless areas of Pakistan. Our current “capitalism” is far from stateless anarchy.
If, on the other hand, they refer to some kind of stateless anarcho-capitalism (like that advocated by Anthony de Jesay and other libertarian thinkers), then they should admit that only a tiny fraction of the educated population even understands, let alone advocates, this society.
It’s a cowardly, disingenuous argument, because either Kristof et all doesn’t actually believe it, or they have a real problem with even rudimentary economic and philosophical thinking.
“But laissez-faire capitalism has laws, including laws that ban buying or selling things like military-grade weapons.”
What principle in laissez-faire capitalism makes the distinction that one cannot buy or sell things like military-grade weapons? What individual right is being violated by this transaction? Along the same line, if I have the knowledge and ability to build my own, personal, nuclear weapon, what principle says I can’t?
The very possession of certain weapons in certain contexts poses an objective threat, and the threat of force *is* force. Exactly which weapons quality is debatable. Nuclear weapons definitely *do* qualify as a such a threat.
I was under the impression that an objective threat of force is if you’re pointing the weapon at someone, or that there is evidence of / known to have some ‘intent’ (eg. Iran’s aggressive comments about Israel) to use the weapon. It’s awfully subjective to come up with a point at which a certain weapon is or isn’t threatening to people. To some people, my having a gun next door is threatening to them, but other people might not be threatened at all.
You’re equating having a gun and having a nuclear bomb as if they’re equal in every possible way.
A gun can be used in personal self-defense, and the important word here is personal, while you wouldn’t find very much use in having a nuclear bomb to defend yourself (you could say you have it to defend your country if needed, but it isn’t your job as a citizen and if you want to you would join the military/police).
I would concede that in the present day I do not see the possession of a nuclear weapon as necessary for personal self-defence, but the question is what happens when humanity progresses to the point of owning space ships? You may need incredibly destructive weaponry (nuclear and beyond) in order to defend yourself (and your crew) from other space ships. Under such a future situation, the limitation on owning anything other than small arms must be completely lifted.
Furthermore, if the standard is personal self-defense, then owning military-grade guns must be allowed, since individuals carry them and use them for their ‘personal self-defense’. Also, by said standard, I can see the clear distinction between owning a nuclear weapon and owning a hand gun, but it seems to get murkier when one talks about, for instance, grenades, bombs, anti-tank guns, anti-aircraft guns, vehicle mounted weapons, field artillery, tanks and APCs (not an expansive list) - All of which are used by individuals for their ‘personal self-defense’.
I know that this is going into concrete examples, but this is the kind of stuff which needs answering, and as an Objectivist myself, I’ve tried (and failed) to answer this question definitively when it was posed by others.
I’ve wrestled with this ever since Yaron Brook said that personal ownership of nuclear weapons is not allowed (he said this at a lecture to military cadets).
Also, my apologies for taking this topic off-tangent.
This mentality that equates “buying and selling” with capitalism also allows people to pitch “cap and trade” as something free-market advocates should get behind. (I understand Kristof himself is a supporter of cap and trade.) I wonder if the concepts of “rights” and “force” are too abstract for these people.
My answer to the “That’s just Rand’s definition” is: So what? The same “argument” can be used against anyone — “that’s just your definition” — and is nothing but a scorched-earth rhetorical tactic that uses subjectivism to destroy the entire conversation before inconvenient (for them) facts can be brought to bear.
Attack that — re-establish the objectivity of concepts. Don’t fall for the “semantics” ruse.
I remember when the Ayn Rand facebook page had a discussion forum, there were plenty of “anarcho-capitalists” there who believed that Rand’s arguments were better suited to anarchy (when flushed out fully). Your (1) implication is going to hurt their feelings, but it’s nice to it stated simply; I really am sick of anarchists.
If all property is privately owned then where exactly is the government’s domain?
There are no commons areas to patrol and property owners can and will supply their own security. So they can see off the unruly as needed. They can also enter into agreements with their neighbors regarding boundary issues.
Also many private individuals will likely be armed and their will not be an artificially high crime rate due to the war on drugs and with near full employment and the pushing up of wages that will cause it’s likely that the utility of committing crimes for cash will be lower than just working for a living. So the violent crime rate will be very small and there is no need for a coercively-funded monopoly to handle such a small problem.
There are also other means of controlling criminals such as bounty hunting, reputational sanctions, and insurance. So no need for Government cops.
When it comes to civil actions there is already arbitration and mediation and perhaps you’ve noticed that companies can find themselves in all matter of public relation problems because the stupid thing they did goes out over social media. So no place for government there either.
Finally, saying that conflict resolution and physical security issues must be left to a coercive monopoly denies the power of the market and the entrepreneurs that make all of our lives better.
Was Rand and by extension are you saying that there was no way there could be a Hank Rearden or Howard Rourke or Dagny Taggert of security or private justice?
What if one were to show himself and to say “I can do better, for less cost and make a profit.” Would you deny him the chance? Would you stile his creative energies?
If I owned a city would you demand that I have a tax-funded security force or courts system? What if my residents liked things the way I did them, do you get to veto their preferences? What if this was the case everywhere? How far are you willing to go to force your views on others?
Finally, we know that you don’t need a government for there to be currency, roads, consumer protection, medical care, libraries, food production and distribution, railways, oilfields, banks etc so is it so far out of imagination that the provision of security and justice cannot be provided on a voluntary basis?
Force is not a market phenomenon. Any form of police or security uses force. That is its function. Such power cannot be held by individuals and expected to be used objectively. That is why the use of force is given solely to a government and only then under certain conditions. Those being that it is used only in retaliation against the initiation of force by individuals violating the rights of others and is done so under objective law. There can never be a Rearden security force and a Taggart police, it is like a contradiction in terms. And it wouldn’t matter if a majority of the people wanted an anarchic society/police. A private police force is force and no one has the right to use force against others as this is a violation of rights. Rights should never be up for a vote.
A demand for security and justice is a market phenomenon. How could it be elsewise? People want a thing and it is supplied. Econ 101.
I read the Binswanger piece and it assumes many things such as the fact that a political process can be objective. Even the most cursory of readings from history should disabuse anyone of that notion.
Orren Boyle, Kip Chalmers, and Mr. Thompson types have always and, will always attach themselves to the process.
Unless the world goes totally Objectivist in the near future you will not be able to rid yourselves of them. And if the world does achieve the Big O then you would hardly need a government as the Randian heroes are certainly capable of coming to terms that will serve everyone’s interests. Can you really see Hank and Dagny suing each other or using violence. Will Ragnar try to steal Eddie’s wallet?
Sure accidents happen, and mistakes are made but the idea that Hank, Dagny and the others lowered to such a position that a cop can be of use is nauseating.
As for cops, have you not being paying attention? Google “puppycide” or “police abuse” or “asset forfeiture” + abuse and you can see what we have for policing in this country. Why would I want those sorts anywhere near me or my paying customers? I have a duty to the people that live in my (hypothetical) city and exposing them to the rank vulgarity that is public policing would mean I’ve failed in my responsibilities.
Binswanger and Rand before him fail in that with a coercive monopoly there is no way for society to rid itself of a bad institution. You are stuck with it, unlike a lousy restaurant or auto repair shop you cannot go somewhere else in town. Not only that but as has been seen in numerous cases is that police have used their station to extract revenge on people who displeased them, using harassment and in some cases arrest. And in some cases being do depraved that their actions lead to death of the person they targeted.
Perhaps you say that in a world of Objectivsts this would not be a problem.
Well, economic concepts such as incentives, marginal utility, regulatory capture, rent seeking and others trump philosophy. If there is a way for a person to better their condition through abuse of they system many, if not most, will. And once they start how do you get rid of them? It takes a lot of effort to get public employees fired, so unless that is not a feature of an Objectvist-run agency then you will have, in time, the same problems we have today.
Also they both ignore the history of private justice. For Rand that is excusable as the scholarship was only starting to become known in the years before her death but Binswanger has access to all that stuff and so by 2011 he should have known that collections of individuals can and have existed quite well with out a socialistic justice/reprisal agency.
That brings me back to my (hypothetical) city. Say I have a million or so renters living there (I own every square foot of the place) and not one monopoly police agency is to be found. Yet they continue to happily live there. Plus business is booming and no one is interested in your Objectivst based Constitution and opinion polls reflect that. And I have plenty of competition from other city owners so its not like my renters are without other options. What right do you have to override their revealed preference? Once you try, you become Boyles on the flesh of my society. And it being my property I have the right to remove you, and if you decide to march down the street intimidating people with your sub-machine guns I can do other things. . .
In summary:
You assume that you can control the political process.
You assume that other folks will follow along with you even if the service you want to provide is of less quality and value than what they already have access to.
You assume you have rights over others, that you can force them to obey you.
And you assume they won’t fight back.
Finally: Just how much violence are you willing to use to get your way?
Warren, I exhort you to read Harry Binswanger’s essay ‘Anarchism vs. Objectivism’ and in light of it to reappraise your case for anarchism.
http://www.hblist.com/anarchy.htm
Markets that are not governed by objective law, based on the protection of individual rights, are not free.
Here is a fun short story about what happens when a dictator tries to invade a country of free men who *are* armed to the teeth with the latest military weapons:
http://www.baenebooks.com/chapters/1416520724/1416520724___4.htm
That said, I do agree that such ownership should not be allowed. The reason is, I do not think people can be objective in the punishment they mete out to those that slight them. It requires an objective third party.
So what is frau then? If a cereal states that it is healthy for you although it is mostly sugar, is this fraud?
And if government intervenes against business that betray people, how is there “division of state and economy like state and religion”?
To find the original intentions or meaning of any political or economical system you must find original documentation from it’s creator not someone’s own interpretation or opinion.