Defining the Free Market: From Abstract to Concrete,but always a Fallacy

Somewhere along the line, “free market” graduated from the world of abstractions and became an actual thing.  By “thing” I mean an entity, something identifiably self-contained, an object in time-space.   In reality, “free market” is simply a name we gave to an economy characterized by a reliance on market forces to determine value. But for many people, “free market” is more than a label: it is something concrete—at least that is how they talk about it. 

When abstractions are spoken of as real things, we call it reification.  Reification is a semantic fallacy, but its use is sometimes necessary when one wants to communicate complex realities with considerably less words.  However, a semantic fallacy, if not challenged, can go on to support faulty conceptualizations of reality, especially once it seeps into discourse.  The special problem in this case is that the reification complements an ideology, one that rejects the natural and necessary role of the government in the maintenance of the economy.  If expressed as a thing, “free market” can be thought of as being interfered with or kept from its natural activities.  If expressed as an entity, it can be given agency, rationality, and rights.  We often talk about government intrusions in the personal lives of people.  For some, a worse offense is when the government intrudes in the free market. 

But this conveys a faulty conception of reality.  As Robert Reich states: “Government doesn't ‘intrude’ on the free market.  It defines and organizes (and often reorganizes) it.”  In reality, an economy is the product of an infrastructure of law that is created, maintained, and enforced by the government.   It is an extension of the state for the purpose of ordering the complex human interactions that occur with economic activity.  And with the constant growth and complexity of technology, which puts economic relations in flux and opens loop holes for economic actors to exploit, these interactions need to be monitored regularly and the laws adjusted accordingly.  The “free market” is not a thing with a right to existence and freedom from molestation; it is a name for something that does not exist without the state and whose quality is wholly dependent upon the laws that form it.

But we are led to believe that economic regulations are always wrong and lead to a loss of freedom.   This rigidity often pits real people against a reified free market.  How else do we understand how a person who lost their health care through no fault of their own, and who, as a result, has lost their life savings because of an accident, is freer than one who has been helped by an update of the legal infrastructure?  Or, that gross accumulations of wealth at the top demand less taxation for the wealthy and less regulation over the actions of corporations—even when there is no historical evidence that this works?  In both examples, it is the “free market” that has been protected, not people.  And in both cases, rights-bearing people are being sacrificed to an ideology and a faulty conception of reality.

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If one accepts the idea that it is mostly hard work and sacrifice that determines one’s income and success in present-day America, it is impossible to explain the growing concentrations of wealth at the top.  Clearly other factors are involved.  A more satisfying explanation appears with a proper conceptualization of the economy and its contingent relationship to the government.   The reality is that the rules are out of date, the rich have given themselves an unfair and immoral influence over how things work, and we have the mechanism and the legitimacy to fix it.  Framing things this way makes it easier to get beyond the rhetoric, the confusing accusations of socialism, communism, or fascism, and on to clearer solutions and discourse.  This can be fixed, but not by those who think the “free market” can fix itself.


For a deeper understanding of how and why we got into this mess, and what the government can and should do to fix it, I highly recommend the documentary film by Robert Reich, Inequality for All.  


APPENDIX

While the Founders are quite removed from our world, they did understand that wealth discrepancy does not sit well with democracy.  It is interesting to see what they had to say about this, and the solutions they might have entertained.  While this is certainly not exhaustive or definitive, it does seem to suggest that at least some of them did not think it was unconstitutional or destructive of liberty for the government to take some kind of action on the economy.  According to David Cay Johntson, drawing on recent scholarship from The Citizen's Share: Putting Ownership Back into Democracy by  Blasi, Kruse, and Freeman, 

The second president, John Adams, feared “monopolies of land” would destroy the nation and that a business aristocracy born of inequality would manipulate voters, creating “a system of subordination to all... The capricious will of one or a very few” dominating the rest. Unless constrained, Adams wrote, “the rich and the proud” would wield economic and political power that “will destroy all the equality and liberty, with the consent and acclamations of the people themselves."

James Madison, the Constitution's main author, described inequality as an evil, saying government should prevent “an immoderate, and especially unmerited, accumulation of riches.” He favored “the silent operation of laws which, without violating the rights of property, reduce extreme wealth towards a state of mediocrity, and raise extreme indigents towards a state of comfort."

Late in life, Adams, pessimistic about whether the republic would endure, wrote that the goal of the democratic government was not to help the wealthy and powerful but to achieve “the greatest happiness for the greatest number."

R. Miller