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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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