Luigi Zingales, professor of economics at the University of Chicago, writes that participants in a free market understandably try to gain a competitive advantage, tipping the market in their favor. As a result, he says, a free and balanced market has no natural advocate or defender. This column aims to fill a small part of that vacuum.
How often do we hear today that the free market is a lawless and heartless place and needs the government to play a greater role to assure society is treated fairly there? Anyone who makes that point knows very little about the subject. In the first place, who can name more than five markets in the U.S. that could be considered free? The crushing hand of the government is omnipresent in commerce today, whether through interference in pricing decisions, forced allocation of capital, a crazy tax structure, or regulations too numerous to count.
Second, a market has no soul. It is the participants who consistently act in their own, selfish interest rather than that of society. Shame be heaped upon them! The complainers do not know of the glorious irony of the invisible hand, that people acting in their own self-interest must satisfy the needs of others, or fail. No ambiguity there. And a place where everyone is trying to satisfy others can hardly be called heartless. Hats off to Adam Smith for his “duh!” moment.
And third, the government itself helps create market imbalances – huge imbalances – by doling out favors to those with the loudest mouths and largest bank accounts.
Indeed, the free market reels around like a punch-drunk fighter, a shell of its real self. There are only two economic paths a society can take, and they are polar opposites – toward a free market or toward a centrally managed market. Can anyone make a rational case for the latter in the 21st century? Let’s make sure we are at least headed in the right direction, the one that enables greater personal liberty and economic growth.
Please, drink my cool aid!