DISQUS

georghasta · 2 months ago

Concerning "Free Market":
There is a linguistic problem - when people think about "Free Market", they tend quickly to think about a market free of rules, regulations etc. But "Free Market" in a free society is a market where people can move freely, act freely (in economic sense) without being blocked by the powerful. On the other hand a "real Free Market" (that one with regulations) is very unpleasant for the powerful, because all his power is useless. So the powerful uses the possibility of this unapparent difference in the meanings of "Free Market" to misguide the society in a direction that is favorable for him. And the "Real Free Market" too, of course, is not free of problems. So it's easy for the powerful to make the society believe that his deregulated Market is the really free one and will solve all the problems...
Until it is to late?

Edward Harrison · 2 months ago

georghasta, you read my mind. I couldn't have said it better. Freedom and liberty is the goal. Free markets is a means to that end.

StilesBC · 2 months ago

Ed,

It seems that you, like so many others, are incapable of distinguishing between the effects of corporatism and capitalism.

You ask rhetorically if market discipline would prevent things like predatory lending and excessive leverage. The answer, as you provide, is quite obviously "no."

But in a free market, fractional reserve banking doesn't exist as it is an institution owing its existence to government and central bank decree. Leverage and predatory lending cannot exist without fractional reserve.

One cannot use manifestations of government central planning as a legitimate argument against free markets. It boggles the mind that intelligent people such as yourself can continually fail to decipher between the two.

Edward Harrison · 2 months ago

That is absurd. Fractional reserve lending is another issue altogether. So is central banking. One can come up with 100 different ways this mythical free market is not being met to justify crony capitalism. These are fig leaves. Getting rid of the central bank is going to end cronyism no more than getting rid of fractional reserve banking. There will ALWAYS be excesses irrespective of the system. What works is the rule of law and the credible threat of penalty for not playing accordingly.

StilesBC · 2 months ago

Ed, you're really being inconsistent here. A free market is a means to the end of Liberty, as you noted. Yet free market ideology is somehow an irrational religion at the same time?

I understand the distaste with notions of "perfect competition" and rational actors. There will always be a business cycle. But to contend that some actors can better 'regulate' the market than others commits the same errors that collectivist ideologues make when suggesting their omniscient central planners are perfect. The regulators you claim we need are susceptible to the same irrationality which they are supposedly regulating. You document this regularly.

StilesBC · 2 months ago

Last word.

There is a big difference between law and regulation. The law is enforced by judges. Regulations are enforced by bureaucrats. The incentive structures behind each are completely different.

We have laws against fraud, misrepresentation, misappropriation in addition to anti-trust laws. We need them to be enforced in order for the market to be "free."

Edward Harrison · 2 months ago

Here we agree. Finally!

But, I would advise that you can't outsource all enforcement to the judicial branch out of practicality. Moreover, they too are subject to capture.

When I hear you speak of judges versus bureaucrats, it sounds more like the black and white of propaganda than the nuance of reality.

LavrentiBeria · 2 months ago

And here Paul Craig Roberts on the present inquailities :

http://www.counterpunch.org/roberts10162009.html

Greed, as discussed here by Ed, is objectively gravely sinful. I'll leave it to the imagination of the reader as to whether what Roberts describes meets that definition.

Edward Harrison · 2 months ago

I have saved this to link to. Thanks.

fred · 2 months ago

You call free market ideology a religion. I suppose that means that, in your opinion, believers in the free market have no valid logic behind their beliefs, just faith. Meanwhile you place your "faith" in the ideal "regulator", the government as arbiter of the fine line between having enough and "greed", the selfless bureaucrat who is somehow less greedy, less corrupt, more diligent, less capable of causing harm, even though he has been handed more power over the lives of his fellow men.

You seek an ever more powerful government, run by ever more powerful regulators overseeing ever greater swaths of our lives and decision making, with the stipulation, of course, that those regulators share your ideals. But, I guess if that government, under future leadership, tried to exert that massive power in ways that you disapproved, they'd be Nazis. Well, I don't trust your big government, and you shouldn't trust mine because governments are just people and they are no more or less philanthropic than your average greedy American walking the street.

In response to my earlier post on another article, you wrote this: "Are you telling me that banks wouldn't try to securitize liar loans if 'market discipline' held them in check. That is preposterous. The risk has been offloaded onto a third party. Again, this is why regulations exist."

My response is, they would surely try if there was a buck to be made, but without implicit government backing behind a large swath of the US mortgage market, Fannie, Freddie, FHA, etc., the global buyers of those securitized loans would have been much more diligent. Without government subsidization of mortgage rates, and artificial suppression of interest rates by the federal reserve, it is unlikely that a housing bubble would have even been possible.

If you don't believe that government intervention in the free market has been behind the serial bubbles we have seen in recent decades, has encouraged the greed and risk taking, I'm probably wasting my time here. So here's my last word. The current administration, their spending policies, monetary policy, and housing policy, are in the process of creating the next (and greatest) bubble right now. You can line up powerful regulators from here to timbuktoo and they won't prevent this whole thing from happening again and it will crash in a more spectacular fashion. Bigger government is the problem, not the answer.

Edward Harrison · 2 months ago

For Fred and Stiles, let me say this, I understand your belief in letting markets guide activity. However, it does seem fanciful to me - I would go so far as to call it faith that markets are the only way forward.

Theoretical free markets are ones in which hundreds of different operators act to buy and sell, none having any market power such that any excess profits are competed away by new entrants.

This is a fiction that has never nor ever will be. Moreover, even in the theoretical versions, there must be rules and regulations, laws and codes of conduct. Who is to enforce those? If you say, the market - then I would call that a naive belief in self-regulation. Criminal activity - failure to follow the market rules - must be enforced with the credible threat of punishment. Otherwise, the result is not free markets but anarchy. This is the point I made above.

As I assume you two are not anarchists, the question then becomes how much regulation of the market is required. After all, the regulator is imperfect and subject to capture. I am advocating for as little as can reasonably be used and still legitimately enforce the rule of law. Some are arguing for more. I am not.

The proponents of deregulation have made the exact same arguments. However, as practiced, the regulation was clearly insufficient, leading to excess and capture. Now, we need smarter and better regulation. We need to re-think the rules of the game. I am not advocating a super-set of regulations to tie us up in bureaucracy but a refinement and enforcement of the existing regulatory structure.

This is wholly consistent with free markets without a blind faith in market forces that leads to anarchy and cronyism.