… I offer here a handy guide to common misconceptions about free-market “economic orthodoxy” – or to use a less-loaded term, “market economics.”
– Market economics does not hold that money is all that matters. Quite the contrary. Competent economists understand better than most people that individuals have a large scope for, and a deep interest in, trading off money for non-monetary benefits, often ones that are intangible. Indeed, in the end – as any decent economist knows – money is valuable only because it’s exchangeable for benefits that are non-monetary and, frequently, non-material. Money is never what ultimately matters.
– Market economics does not hold that the world would be perfect if only government stays out of the way. Even in the best possible market economy, some workers lose jobs and some businesses go bankrupt. Indeed, in market economies such churn is unavoidable. What market economics does hold is that empowering the state to reduce the incidence of churn will either excessively increase such churn or give rise in its place to different problems that are far worse for the very people whom the state ostensibly intends to help.
– Market economics does not hold that consumers, workers, investors, and entrepreneurs are fully informed and never prone to error or to personal irresponsibility. What market economics does hold is that, while no economic or social arrangement will ever eliminate human ignorance and irresponsibility, government attempts to shield individuals from these realities only make individuals even less informed and less responsible.
– Market economics does not assume that markets are perfectly competitive and that prices, wages, and interest rates adjust instantaneously.
– Market economics does not assume that all foreign governments avoid imposing tariffs and paying subsidies that affect economic activity in the home country.
– Market economics does not assume that workers displaced from jobs instantaneously find new jobs at pay equal to or higher than these workers earned in their former jobs.
– Market economics does not assume that tax cuts are a miracle elixir, or that current taxes should be cut irrespective of the level of government spending.
– Market economics neither discounts the value of work nor denies that people find meaning and dignity in their jobs. Yet while market economics is especially insistent that production precedes consumption, it insists also that the value of work and other production activities lies in how much they increase people’s ability to consume. Market economics understands that, in our world of scarcity, work for the sake of work – work done regardless of its contribution to people’s ability to consume – is wasteful. And there’s no true dignity in spending one’s time wastefully, even if a great amount of sweat is produced by the exertion.
Finally, I urge you not to join the chorus that incessantly chants that most of the world for the past 40 years has been governed by a policy of virtual laissez faire. Starting in the late 1970s, some tax rates were cut (as some tariff rates continued to fall), some activities were freed from government regulation, and, of course, Maoism and then Soviet communism perished.
But the state has remained much more than a night-watchman. Non-tariff barriers are significant, immigration quotas are fixed firmly in place, and governments continue to take a quarter or more of GDP and dole out significant amounts as subsidies. And at least in the U.S. there’s also been a cancerous growth of occupational-licensing and land-use restrictions. Our world isn’t close to the ideal endorsed by scholars such as F.A. Hayek, Milton Friedman, James Buchanan, or Robert Nozick.
-Prof. Don Boudreaux (Professor of Economics, George Mason University, speaker, author, blogger)
(H/T: Cafe Hayek)