15 July 2012

Since I am not a candidate, I can say…

Free Enterprise is not evil.  Let he hasten to say that it is not noble either. That’s what Arthur Brooks, President of the American Enterprise Institute says in this morning’s “Five Myths” segment - Five myths about free enterprise - The Washington Post.

Those on the left make free enterprise out to be so bad, which, even if true, doesn’t matter. 

Because people will always want to make money.  They did in medieval times, they did in Soviet Russia, they have done it everywhere, especially America.  De Toqueville thrills to the pecuniary instinct in his famous book.  It’s old, it’s pervasive, and it’s 100% American.

Like the theory of sin, original or otherwise, the debate over free enterprise had focused on the wrong question.  It is not whether it is good or bad, but how it should be governed.

To those who find it innately good, a sort of economic prelapsarianism, any government of economic activity weakens its power and thus its goodness.  Similarly, for those who think free enterprise is proof of the T in TULIP, government is essential to hobble its satanic power.

Political Manichaeism is the order of the day, of course.  But I know that in the titanic battle between ideas it is ordinary lives that pay.  So my interest is in smearing the boundaries ideologues create and defend.  Hence this essay.

People will always want to make money, I said at the beginning.  The only question is to what extent (if at all) it should be governed.  As most of those who read this are on the left side, making the case for governing free enterprise is not my purpose.  Giving you non ideological reasons to explain it to a free marketer is.

1. Human beings are imperfect, and everything they do is imperfect.  Even when they make money. 

When free marketers extol the perfection of markets (and the imperfection of government) remind them that human beings run both. And even kids know you need to have clear rules before starting to play or the game won’t last very long. 

2. Laws are better at making us less bad than making us more good.

Ironically, laws that punish are better than laws that reward.  It makes sense when you realize the number of good outcomes is far more than the number of bad ones.  Make what is wrong the focus of the laws, and then give them consequences, costly ones.  Robbery is a form of economic activity, but it is costly to society, so we ban it and make doing it costly.  Any economic activity that we conclude does more harm to society than good needs regulation.  Robbery is only one, and every change in society brings new ways.  It takes an internet to create phishing.

3. Laws are nothing but rules of the game, which people follow only if they are understood to be fair, impartial and universal. 

No child joins a game whose rules are rigged. Democracy us the only way we know to create rules.  It is not automatic that they will, but every other system is worse (as Churchill observed). Those laws will themselves be imperfect, because people are, but they will be broadly imperfect, which is fair and impartial and imperfect. And annoying.

4.  When people find a way around the rules, and they always will, build better rules not necessarily more. 

This is hard, because government and business grow in the shape of the garden we create with rules.  Major changes threaten both public and private establishments.  That’ why slavery did not end until there was a war, and industrial excess until the Great Depression.  Sadly, the system has to be on the verge of collapse before transformation actually takes place, and often at a very costly price.

Start with these (I think) common sense notions, and it is clear that the idea of a completely free market is folish, just as is a perfectly governed one. Let’s focus on deciding what harm must be prevented and redressed, make it very costly to do it, and ensure it is enforced.  That would be a good start.

But right now, we are unclear on all three.  And we wonder why things are a mess.

1 comment:

Sherron said...

Thanks for "making the case for governing free enterprise is not my purpose. Giving you non ideological reasons to explain it to a free marketer. . ." I looked at the Five Myths article, yours is more memorable.