31Mar10 A Criticism of Free Markets
By: Barry Belmont

This is an adapted excerpt from a larger work of mine entitled “The Evolution of Free Markets.” Please do enjoy.

Critics of free markets generally (and the super free markets of Austrian economics specifically) tend to be of this type:

1) I cannot think of how A would occur on the free and open market.

2) Therefore A cannot occur on the free and open market.

3) Therefore A must be provided by something extraneous to the free and open market.

Practically every objection you will ever hear against free markets will be of this sort. For instance, my first lecture on “anarcho-capitalism” was mostly criticized as “Well, I can’t see how police protection could be provided on the free market. Since it can’t be provided on the free market, the State is thus necessary in order to provide this.” It is a categorical error lacking all meaning since A can be anything: roads, medicine, defense, you name it. There are hundreds of different versions of this basic formula, but I’m telling you right now, not a single one of them is valid at all as a critique.

It’s exactly akin to me saying “I can’t think of how televisions would occur on the free market, hence televisions can’t occur on the free market, thus televisions must be provided by the government. QED.” And this isn’t a facetious example, I honestly have no idea how televisions could come to be so prevalent within modern society. Think of all the things that need to rise with them in order to make them successful: You need various televisions stations with different programs that people want to watch, these programs require actors and directors and writers, but the shows themselves need advertisers and wardrobe and catered food. The executives need fancy offices and need to draft deals to pump information out through the airwaves and the airwaves need to be interpreted by various intermediate satellites and big receivers and there’s tons of computers and infrastructure and…and that’s just to make the complex product of a TV (with resistors and capacitors and liquid crystal displays and built in DVD players and now they’re all flat and pristine), just the product of the TV work. In fact, I doubt there is a single person in the world who know all the ins and outs of making televisions available on the free market, it’s just too complicated. And yet there are televisions.

The beauty of free markets is that it’s one big collective brain (in a metaphorical sense of course). As I have said previously, the free market is nothing short of the sum total of the voluntary interactions of all consenting individuals. What that means is that no single person or group of people needs to hit upon “the” solution for a problem in the market, simply by taking part within the marketplace, every single person is contributing toward progress. The reason this works is because there is no “correct” solution to the problems of the free market. The free market is an optimizing process, not a perfecting process. The difference being that to optimize something means to do the best you can with what you’ve got. Perfection is a completely foreign concept in the market. There is no ultimate goal that the free market strives for. Rewind the tape of civilization and I can guarantee you that the iPod would never again have been invented. This is much like the evolution of species, go back a hundred million years ago and let evolution run its course again – you would never end up with Homo sapiens ever ever.”

Perhaps I’ll share some of it later, such as the comparison of the Invisible Hand with Natural Selection (they’re actually just different embodiments of the same underlying principle of self-organizing systems), but for now, this’ll have to do.

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View Comments Posted by Barry Belmont in Libertarianism, Science
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  • dagnyroark

    You fail to refute the critique except by saying that it is not a critique. There is not a correlation between TV's and Police forces. You brush off ligament critiques as “lacking in all meaning” but seem uneasy to actually answer the question directly. Anarcho-capitalism seems to be a sophomoric attempt to be profound.

  • Ginger

    I enthusiastically agree. Just wanted to add, given the evolution tie in, that given the same environment (and no ultimate goal), there seem to be consistent optimized ways of taking advantage of the same environment.

    http://en.wikipedia.org/wiki/Convergent_evolution

    Perhaps we wouldn't get homo sapiens exactly - but chances are we'd get something A LOT like them.

    After all, we modern humans had to beat out 2 other prominent competitors to fill our current species “trade.”

    Similarly, given a consistent environment and a fresh free market starting point I wonder if we wouldn't have gotten an something REALLY close to an iPod.

  • http://www.unrforliberty.com/ Barry Belmont

    Thank you for kind remarks. But I have to say that you are just patently wrong about your interpretation of convergent evolution. Granted convergent evolution is a very interesting aspect of evolutionary biology with numerous insightful notions, but it is not applicable to my present analogy.

    I said that if you go back hundred million years and let the tape play again you'd never end up with anything like homo sapiens. I'll even go further and say you'd never end up with anything even close to modern human beings. Not even the apes or monkeys or prosimians.

    Put another way, imagine if the dinosaurs didn't go extinct. Mammals likely would have never gotten past being minor scavengers (akin to todays moles or squirrels for instance).

    Evolution has no design, it has no purpose. Natural selection isn't trying to guide nature to “us” or even anything like us. It has no goal or end product in mind. This can be seen by taking the converse of my example: try predicting what life will be like 100 million years from now. It's impossible to do because evolution simply doesn't work that way.

    As Michael Shermer and Stephen Jay Gould have pointed out, there is an intricate interplay between necessity and contingency that makes it impossible for there to be anything like an end goal for natural selection.

    The same thing occurs in the market. Try, right now, to predict the inventions we'll see in 50 years or 100 years. It's impossible because that's not how markets work.

    They are self-organizing systems that rely heavily upon time-dependent variables. As such there is a sort of bifurcation of possibilities that are nothing short of im.poss.i.ble. to predict.

  • Ginger

    Given a similar environment, the same characteristics tend to appear because environmental pressures favor their selection.

    Removing water from the earth would constitute a significant change in the environment enough so that a man-like creature would not evolve.

    Grazers in Australia and Grazers in America separately evolved the same features even though the closest common ancestor had had none of the grazing features. Something is going to fill the “trade” of grazing, and that thing will be selected by the same pressures because the environments are similar.

    Also, assuming in your new market world, humans are still humans with human desires and the physical world is the same. Humans still like music, humans like small portable shit, Silicon is around …I would call that a similar (SAME) environment to what we have now. All those things are strong selective factors that would result in the development of Something to fill that “I like music and small portable stuff” trade. If you take away silicon and or the desire for music, we wouldn’t get anything like an iPod.

    I realize the market and evolution have no goal. But I can say that if I take an antibiotic in a kinda-sorta type of way, the bacteria will evolve to not respond to that antibiotic anymore. To say that evolution is without a goal is different than to say that evolution in no way can be predicted. Doctors predict it every time they prescribe an antibiotic and tell you to take the whole prescription. They absolutely can't predict the evolution down to the nth degree, but they can tell you to take every damn pill or else predictable evolution is gonna happen. Scientists can predictably CREATE different species of fruit flies just by changing their environment. Evolution has no goal, but to some degree it can be predicted. The market has no goal, but I CAN predict that the “transportation” trade will be filled even if I don’t know HOW specifically it will be.

    Even with the dinosaurs staying ALIVE, intelligent mammals easily could have evolved on planet earth. Just because dinosaurs dying helped that happen faster in OUR past, doesn’t mean that that is the ONLY way it could have happened.

  • http://unrforliberty.com/ Barry Belmont

    I hate to sound mean, because you obviously know a little something about biology, but you are just completely wrong. You are wrong not only because you are misconstruing my argument (in the 1300s, people enjoyed music, but does that mean anything even resembling the iPod could have been fathomed back then) but also because your conception of evolution is not founded in facts and evidence.

    Consider the ramifications of your argument: what you are claiming is that even if an asteroid had not hit the earth 65 million years ago that there would have still been “something like” people and these people would have inevitably invented “something like” an iPod. But that's clearly ludicrous. I almost refuse to believe that you could think such a thing is true.

    You argument, whether you realize it or not, is making the claim that the future of evolution and of markets are predictable to a vast extent. Granted we can predict many things — general trends, patterns, even convergent evolution given the right elements — but that does not mean that everything is therefore predictable. And sure, this isn't what you're claiming, yet it's closer than you would care to admit.

    You are espousing a very grandiose position. You are simultaneously claiming that the “something like” the iPod is the inevitable production of the human mind and that the human mind is the inevitable production of nature. Yet you'll never find a competent historian of economics to admit the first proposition and you'll never find a competent evolutionary biologist to agree to the second. You are, I'm sorry to say, just completely wrong on that point.

    The other point you seem to bring up is that of the doctor predicting the effects of medicine. This, I'm sorry to say, is a fallacious use of different scales. I grant that you could predict short term goals in both evolution and the market (increased rain fall will cause this species of plant to overtake that species; increased revenue for Google will cause Microsoft to lose marketshare), but this is entirely different from the long scale implications of my original contention. Yes, if I spend five dollars on a Big Mac I can see the direct correlation. A little less Yes, I can see how buying stuff from McDonald's will increase their profits. A little less, I can see how increased profits will cause further company expansion. A little less, I can see how this might cause McDonald's to enter foreign markets. A little less, I can see how there might be problems based on cultural differences. But that doesn't mean someone could have predicted McDonald's problems in India when the company was first created.

    You're screwing up your time scales. Yes, prediction is possible, but not prediction on the level that you are claiming. If you actually believed what you were saying, give it some thought, and tell me what inventions will rule the market place even ten years from now.

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