The eternal truth of market principles
March 28, 2009 – 10:33 am by JohnAs I understand it, one of the great philosophical contributions that Ludwig von Mises made to the world was not simply to explain why governmental perturbation of market forces doesn’t work, but to explain that it can’t work—he explained how the things that the State can achieve are limited by the nature of reality just as market forces are bound by the nature of reality.
I think this insight, which hardly seems revolutionary, helps libertarians understand the problems with government stimuli, job-creation programs, and bailouts better than someone who simply thinks less government is better than more. I think the typical semi-free-marketeer/Chicago-style/conservative objection to government interventions is: Socialism doesn’t work, we are already too socialist and attempting to apply more socialism is only going to make our economy worse, and we need a return to more laissez-faire economics. That’s true as far as it goes and nothing about it is incorrect, but the Austro-libertarian can make a stronger or at least slightly different statement: The truth of free-market libertarianism is constant, permanent, eternal; regardless of what type or degree of interventionism an economy suffers from and regardless of what policies are proposed, discarded, or implemented, the truth of market forces is always acting on every entity in the economy, be it an individual, a business, or the State. The extent that socialism has been implemented in an economy is not equal to the extent that capitalism has been eliminated or obstructed; the principles of free-market capitalism are always present and are always acting on everyone. Socialism isn’t unfeasible simply because “it doesn’t work”; it works exactly as the principles of human action dictate that it must work. State-directed economies don’t fail because they prevent the principles of economics from acting; they fail precisely because the principles of economics are always and forever acting on everyone and everything.
5 Responses to “The eternal truth of market principles”
It’s almost ironic b/c from the socialist/more extreme communist side, you often hear the sentiment that it works in theory, it just has to be implemented correctly.
Austrian economic theory is helpful & you’re right that it’s an insight. But it’s important not to over-rely on theory, but to use it as a framework. As many things work in theory that don’t match reality.
By kerrjac on Mar 28, 2009
This provides an excellent opportunity for me to clarify my point a little, which I neglected to do in the original post. (I’ve been working on being more concise and less clunky in my writing, but too often in recent months I’ve left out important points. I need to stop sacrificing thoroughness or clarity for brevity.)
What I should have said is: The principles of economics and human action, whatever those are and to whatever extent they can be said to be axiomatic for whimsical humans who exhibit free will, are constant and eternal; they aren’t abrogated or blocked by government intervention. And I would have added, of course, that free-market libertarianism has to come close to describing those human truths, or else we wouldn’t see human nature foiling the efforts of the socialists every day.
Anarcho-capitalism doesn’t necessarily constitute complete truth about human nature; but I maintain that it comes awfully close and that whatever can be said to be a universal human truth is always acting with equal strength on all players in an economy, regardless of the extent of socialism or liberty in that economy.
By John on Mar 28, 2009
Point taken.
One interesting point, as a side-note, that Greenspan brought up in his book was that there maybe different “modes” of capitalism, which vary by culture. Japanese culture, for instance, is much less conducive to banking than American culture. & their potential to establish any strong financial/banking infrastructure, he claimed, rested on their bringing in outsiders. He didn’t elaborate much on these “modes”, but the implication was that as more nations continue to develop & move towards capitalism, we’ll see different “flavors” of capitalism play out in the international scene (rather than, say, the clashes of capitalist vs. socialist ideologies we’ve seen over the past decades).
By kerrjac on Mar 28, 2009