Freedom in One Lesson

40.

Leave It to the Free Market

Once upon a time, before government had so thoroughly commandeered and domineered voluntary arrangements, whether of exchange or charity, an acceptable answer to “ Well, what would you do?” about some social issue might have been, “Leave it to the free market.” It would have been understood as something like, “Let people cooperate however they choose, as long as they respect others’ rights,” and would have no negative connotation.

But that time is long gone. Decades of demeaning misrepresentations of market mechanisms, combined with many voluntary arrangements crowded out by government, have turned a widely respected answer into one that elicits suspicion.

One of Leonard Read’s lifelong projects was to portray the beneficial (indeed, irreplaceable) reality of such arrangements and the harm resulting from government’s ham-handed interference. He addresses this issue many times but perhaps does it best in “Leave It to the Free Market!,” from his 1971 book Then Truth Will Out (Read 1971a).

When things go askew in the economy planners in and out of government “rush to the rescue” with countless panaceas. Those of us who question their schemes are confronted with the challenge, “ Well, what would you do?” And our reply, “Leave it to the free market,” is shouted down as being impersonal, heartless, inconsiderate, cold, and not quite humane. . . .

. . . The market, if free, is intimately personal; it renders justice in the only sensible definition of that term; it continuously and automatically moves ever-changing satisfactions and ever-changing aspirations-supply and demand of particular goods and services-toward a harmony one with the other; it is humane to the extent of the human kindness that is within us.

The alternative to the free market is the rigged, planned, dictatorial, coercive, interventionist, authoritarian market, variously known as the planned economy, the welfare state, omnipotent government. . . . As contrasted with the free market, this is definitely disruptive and antisocial; it is, by its nature, incapable of rendering justice; it is forever and of necessity forcing ever-changing satisfactions and ever-changing aspirations toward a state of disharmony one with the other—shortages of this, surpluses of that, and so on; it stifles and eventually kills human kindness. . . .

The free market is intimately personal. . . . [In it are] persons deciding each for himself what to produce, where to work, what to buy and sell, and what are to be acceptable terms of exchange. I, who know more about me than anyone else, in charge of me! How possibly can a way of life be more intimately personal than each individual his own decision-maker!

In the alternative situation, a bureaucrat presides over these decisions. . . . He cannot know, can only guess, what may be your countless and ever-changing preferences or what constitutes your idea of your welfare. Someone who knows nothing of you and me in charge of you and me. Dictatorial to the core!

The free market renders justice. Justice . . . relates to relationships one with another and is achieved when our relations with each other are fair. How is a just exchange to be determined? It is simply a matter of respecting subjective judgments. If you prefer what I have to offer more than what you stand ready to give in exchange, that is all there is to it: economic justice. This is willing exchange—both parties willing—a prime tenet of the free market way of life.

. . . A bureaucrat . . . to the extent he intervenes in our relationships, to that extent are exchanges unwilling, that is, not in accord with your own preferences. If it be conceded that you and I have as much right to life, livelihood, liberty as anyone else, then all exchanges forced upon us are, by definition, unjust. . . .

The natural tendency of the free market is to point supply and demand toward a balance. Implicit in the free market is free pricing. A rise in the price of a good or service discourages demand and encourages supply; the opposite effect is produced when price falls. . . . Hence, supply and demand are always tending toward a balance. . . .

The alternative is political rigging: wage, price, rent, interest, exchange, and production controls. . . .

. . . It is only political interference with the market that makes us think in terms of “shortage” and “surplus.” . . .

. . . This least efficacious way of economic life presupposes a knowledge on the part of bureaucrats that does not exist, even remotely. No one of them knows any more of the infinite data implicit in the market complex than you or I. The very fact that they think of themselves as possessing such knowledge ought, in itself, to disqualify them.

People in a free market are humane to the extent of the human kindness that is within them. The most successful war on poverty ever fought has taken place during the past two centuries when the free market has been most nearly approximated. This has revealed an incontestable fact: the most helpful service we can render our fellowmen is assiduously to attend to our own knitting—not theirs! Yet, withal, there remain some persons in distress inviting that the Judeo Christian principle of charity be practiced. . . . Whatever this spiritual content—bountiful or niggardly—it is the fact given; there is no more or less; and it will achieve its total outpouring among men when free, which is to say, among men when self-responsible—free and self-responsible being one and the same. There is no way for you or me to manifest more compassion than is within us. We manifest all there is when unhampered.

The alternative is a resort to coercive devices—the welfare state. . . . If there be compassion in their hearts, how do they propose to exercise it? With the fruits of their own labor, as the practice of Judeo-Christian charity suggests? Indeed, not! They insist that you and I, the taxpayers, do their good for them. . . .

. . . Human kindness is stifled and eventually killed by this process. . . . It is not an act of kindness for me to forcibly take from you and then give to the object of my concern. Robbing Peter to pay Paul is unkind to Peter and, certainly, there is nothing kindly in the act of bestowing such loot on Paul.

. . . This process destroys kindness in the whole population. When government assumes the responsibility for the welfare of your neighbor, your sense of responsibility toward him vanishes. . . .

. . . When government takes from you and me, for whatever purpose, it takes the funds we might otherwise have used to relieve the distress that comes within our purview. We cannot give that which we do not possess.

Doubtless, the greatest mischief of all is the false impression of humanity this process induces. Kindliness stifled and killed—less and less of it practiced or seen. And unthinking people, viewing each other in this stultified condition, conclude that this is their natural state: charitable good-for-nothings! How far from the truth! Judging the behavior of slaves to be the way men would act in freedom is no more intelligent than expecting the dead to act alive. . . .

Unquestionably, the millions are unable to see the free market’s accomplishments and potentialities. So remarkable have been its wonders, even when freedom has only been approximated, that most people in their credulity have credited the wonders to everything except the free market. . . . The free market stands mutely responsible for all the progress we have enjoyed. . . .

. . . The free market [is] that institutional or societal arrangement in which there are no man-concocted restraints against the release of creative energy. It is the maximum release of creative energy that assures maximum moral, spiritual, intellectual, economic progress. . . .

I share Bastiat’s faith: “All men’s impulses, when motivated by legitimate self-interest, fall into a harmonious social pattern.” It is only in a free market relationship that harmony and balance can exist; it is the introduction of coercion—the overseeing force—into our relationships that sets up antagonisms, that pits us against each other, that creates imbalance, that brings on the social conflicts.

Reduce the social equation to you and me and one other that it may be clearly viewed. I do whatever I choose so long as it is peaceful; the same for you. We exchange when it is mutually advantageous to do so. The third party’s delegated role is to do absolutely nothing unless one of us infracts a right of the other. Or, if there be a dispute, he invokes the rules of the game. This is the free market in miniature. A greater harmony is unimaginable.

Now let the third party force his goals upon you and me or take from you and give to me. All three of us will become antagonists. Social chaos! And the same applies if we multiply the three of us by millions.

Today, there is widespread but undeserved denigration of voluntary arrangements and their power to advance participants’ ends without harming anyone by violating their rights. Equally widespread and undeserved is the credit given to government interventions that actually hinder markets from working wonders achievable in no other way.

Leonard Read argues persuasively that such misunderstanding turns reality on its head. Voluntary arrangements (for which “market mechanisms” are just a convenient shorthand), harmony in compromise, and justice (not violating the rights of anyone) lead to social coordination, even in times of perpetual changes. Such coordination is intensely personal, reflecting each participant’s circumstances and preferences. It enables all the charity that is in us, which is in turn strengthened by practice. In contrast, government intervention breaks down social coordination, produces social conflict and injustice, and “stifles and eventually kills human kindness.”

Leonard Read sees through the topsy-turvy way blame is assigned to voluntary arrangements—the free market—and credit to coercive interference in those arrangements. We should heed his valuable conclusion:

I shall always try to expose the flaws of all panaceas by the social planners, and my response to their ‘Well, what would you do?’ will continue to be, ‘Leave it to the free market!’