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>Patrick Gunning wrote: 
 
 
>Second, Daniel, I would like to discuss the use of the term "free" to  
>modify "market economy." One justification, based on a desire for clarity,  
>for this term is that it distinguishes between a market economy in which  
>entry into employment, business, the ranks of consumers, banking, etc. is  
>not restricted by law. Economists use the term "free banking," for example  
>to refer to a system in which anyone is free to start a business as a  
>bank. Similarly, we can use the term "free market economy" to refer to a  
>market economy in which everyone is free (i.e., not restricted by law) to  
>engage in consumption, resource supply, production, and exchange. 
> 
To which I respond: 
 
I am afraid that I do not know what it means to say "entry into employment,  
business, the ranks of consumers, banking, etc. is not restricted by  
law."  It certainly takes little in the way of legal permission for one to  
join the "ranks of consumers" and so to describe a market economy with or  
without the adjective "free" brings little to the table.  I hope you don't  
mean that in a market economy (not a "free" market economy) individuals  
would be restricted by "law" from becoming consumers.  Turning to other  
activities that you feel are enabled by the adjective "free", "entry into  
employment, business,..., banking etc" I am afraid I don't get the point  
here either.  I am unaware of any economy in the world in which one could  
simply hang out a shingle with the word "BANK" on it and proceed to  
dispense with the functions normally associated with that idea (have access  
to a central money supply, engage in interbank transactions, accept and  
dispense other legal instruments associated with "banking").  So of course  
to become a "bank" requires the sanction of the collective power (the  
state), but the existence of this sanction does not mean that we do not  
have a "market economy" in mind when we discuss this situation.  What  
analytical clarity is gained by use of the word "free"?  I insist nothing  
whatsoever is added. 
 
The Gunning adds: 
 
>Of course, I am writing here about economic theory, or the ideas of  
>economics conceived as a body of knowledge. Because the words of economics  
>are also used in everyday speech, they can refer to entirely different  
>things by people who have different motivations. Libertarians, for  
>example, may use the term "free market economy" in a much different sense  
>than economic theorists. 
 
That is precisely my point.  Libertarians wish to lead us to believe that  
all of these "things" in contemporary economies (permission to become a  
bank, or pick your favorite libertarian outrage) are unnecessary and thus  
violate some romantic state of nature in which we were once truly  
"free."  Hence the use of the adjective "free" as some ideal type to which  
they hope, with great effort, we will someday return.  As romantic polemic  
it is fine.  Does it bring anything to economics?  Of course not. So if  
libertarians wish to use it, by all means let them--just smile when you  
hear it.  But for economists to use it is quite another matter.  I do not  
have any problem when the "words of economics are used in everyday  
speech."  But we must be doubly alert to situations in which "everyday"  
words make their way into economics and thereby acquire some patina of  
rigor and coherence.  Few words can match "free" as an example of this problem. 
 
And then Gunning says: 
 
> >From this point of view, the term "free" is not at all tendentious or  
> normative. It describes an image that the economist typically begins with  
> in an effort to evaluate the effects of some policy that restricts  
> otherwise free exchange. 
 
And this is exactly why I get so cross when economists use the adjective  
"free."  If the economist uses this conceptual model as the norm against  
which to "...evaluate the effects of some policy that restricts otherwise  
free exchange" then logical incoherence cannot be far behind.  Just what is  
this happy "free" state that is the norm against which some policy that  
"restricts otherwise free exchange" is to be evaluated?  Is it the presence  
of toxic chemicals in the water we wish to drink?  Is it the excessive  
presence of greenhouse gasses that are giving us spring in January in the  
northern latitudes?  Is it child labor in the smaller latitudes--much of  
which has been justified by economists on the happy grounds that it is  
"efficient"?  Is it the presence of indentured labor in northeast  
India?  Is this the "free exchange" that warrants comparison with some  
"meddlesome" policy that seems to make someone less "free"? 
 
So not only is "free" of little analytical value in economics, it becomes  
absolutely pernicious when used in a way to celebrate the status quo  
against which some new policy must be judged.  For in a contest in which  
language plays such a central role, if we are not careful it will soon  
become a struggle between those who value being "free" (as in "free  
markets") and those who are accused of favoring government "intervention"  
in such markets.  Economics is already too full of such vapid  
discourse.  We call it applied welfare economics (or consequentialist  
welfarism, to use Sen's term). 
 
Dan Bromley 
 
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