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Q: What is the role of the free market?
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| A: It is the main driver of opportunity in our country, but we have to continue to work on the rules of the market by understanding our values. Today, there are probably both too many and not enough regulations. And we're need to have serious conversations to figure out to how to move forward. |
Before I try to give more details, we should be clear: there is no such thing as a “free market.” That term is designed to make you think that our economic and social reality is about individuals making whatever choices they want [1], with success or failure being solely the result of the confluence of individual decisions.
It is a shorthand way of saying: “build a better mousetrap and the world will beat a path to your door.” Or, “you get what you deserve.”
But we all know this isn't true. Lots of genius ideas have never seen the light of day, and lots of people have toiled in obscurity for ages, and lots of people have lived off of the money they inherited or the whatever lucky strike they stumbled into. The “free market” isn't a “market.” It's not us making smart choices, it's mostly random and fickle.
Nor is the market “free.” The fastest way to acquire a lot of money is to steal it from somebody else. But we don't consider that to be a free choice. Instead, what we mean by “free” is “within the bounds of whatever rules and laws I think are good.” So no, you can't freely take someone else's stuff. And no, you can't freely pollute the environment in order to sell goods and services. Or freely lie about what you have to offer. We all consider those reasonable limits to freedom in the marketplace.
So what do we have instead? We have a regulated market. There are rules, some of which help individual consumers and some of which help businesses, governments, and organizations. And there are other rules, some of which hurt individual consumers, and others of which hurt businesses, governments, and organizations.
The question isn't: “does the free market work?” The question is: “what is the impact of rules in the marketplace?”
Rules from Values
Here's one example of a rule in the “free” market: you have to be 18 years old to buy tobacco. The reason we have this rule is because of one of our shared values: to protect children. Once you're an adult, you can do what you want. But before that age, we mostly agree it is appropriate to limit your access to potentially dangerous items.
This rule is good for kids, but bad for tobacco companies. It means there is fewer people they can sell their product to. But generally, the rest of us are okay with this kind of regulation. (And maybe some of the people who work for the tobacco companies agree as well.)
There are countless other values which are generally agreed upon. We believe in private property (the ability to own land) personal property (the ability to own stuff) and contractual agreements (the ability to make extra rules with other people that everyone agrees to.)
But just like the “protect children” value is great for almost everyone (e.g. not for tobacco companies), other rules are great for some and not for others. It's these conflicts in rules that cause us to need to re-examine our values.
| Example: One of the reasons businesses can be successful is because of their ability to task risks, which is achieved through liability limitations. But that also means that a company can go too far in doing something dangerous or hazardous, and then avoid responsibility through these liability limitations. |
Answering the Question
There are probably both too many and not enough regulations. By that I mean that some areas are likely over regulated and others are under regulated. And we're need to have serious conversations to figure out to how to move forward.
I'm open to your ideas.
[1] In this one regard, former Labor Secretary Robert Reich does have a point.