Economics Dictionary of ArgumentsHome
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| Free market: A free market in economics is a system where prices and the distribution of goods and services are determined by supply and demand, with minimal government intervention. In a free market, producers and consumers make decisions based on their self-interest, leading to competition, innovation, and efficient resource allocation. See also Markets._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Economic Theories on Free Market - Dictionary of Arguments
Rothbard III 912 Free market/economic theories/Rothbard: There are many economists who regard the "free market" as only being free of triangular interference; such binary interference as taxation is not considered intervention in the purity of the "free market." For triangular interventions see >Price control/Rothbard, >Interventions/Rothbard. Chicago school/Knight/Rothbard: The economists of the Chicago School - headed by Frank H. Knight -- have been particularly adept at splitting man's economic activity and confining the "market" to a narrow compass. They can thus favor the "free market" (because they oppose such triangular interventions as price control), while advocating drastic binary interventions in taxes and subsidies to "redistribute" the income determined by that market. >Distribution/Rothbard, >Frank H. Knight, >Chicago School. RothbardVsChicago School: In short, the market is to be left "free" in one sphere, while being subject to perpetual harassment and reshuffling by outside coercion. This concept assumes that man is fragmented, that the "market man" is not concerned with what happens to himself as a "subject-to-government" man. Def Tax illusion/Rothbard: This is surely an impermissible myth, which we might call the "tax illusion" - the idea that people do not consider what they earn after taxes, but only before taxes. In short, if A earns $ 9,000 a year on the market, B $ 5,000, and C $ 1,000, and the government decides to keep redistributing the incomes so that each earns $ 5,000, the individuals, apprised of this, are not going to keep foolishly assuming that they are still earning what they did before. They are going to take the taxes and subsidies into account. >Government spending/Rothbard. Rothbard III 1035 Free market/Economic theories/Rothbard: There are two general lines of attack on the free market, using external benefits as the point of criticism. Taken together, these arguments against the market and for governmental intervention or enterprise cancel each other out, but each must, in all fairness, be examined separately. 1) The first type of criticism is to attack A for not doing enoughfor B. The benefactor is, in effect, denounced for taking his own selfish interests exclusively into account, and thereby neglecting the potential indirect recipient waiting silently in the wings.(1) 2) The second line of attack is to denounce B for accepting a benefit without payingA in return. The recipient is denounced as an ingrate and a virtual thief for accepting the free gift. The free market, then, is accused of injustice and distortion by both groups of attackers: a) the first believes that the selfishness of man is such that A will not act enough in ways to benefit B; b) the second that B will receive too much "unearned increment" without paying for it. Rothbard: Either way, the call is for remedial state action; on the one hand, to use violence in order to force or induce A to act more in ways which will aid B; on the other, to force B to pay A for his gift. Ethics/economics/Rothbard: Generally, these ethical views are clothed in the "scientific" opinion that, in these cases, free-market action is no longer optimal, but should be brought back into optimality by corrective State action. Such a view completely misconceives the way in which economic science asserts that free-market action is ever optimal. Rothbard III 1036 RothbardVsInterventions: It is optimal, not from the standpoint of the personal ethical views of an economist, but from the standpoint of the free, voluntary actions of all participants and in satisfying the freely expressed needs of the consumers. Government interference, therefore, will necessarily and always move away from such an optimum. Rothbard: It is amusing that while each line of attack is quite widespread, each can be rather successfully rebutted by using the essence of the other attack! RothbardVs 1): Take, for example, the first - the attack on the benefactor. To denounce the benefactor and implicitly call for state punishment for insuffcient good deeds is to advance a moral claim by the recipient upon the benefactor. We do not intend to argue ultimate values (…). But it should be clearly understood that to adopt this position is to say that B is entitled peremptorily to call on A to do something to benefit him, and for which B does not pay anything in return. We do not have to go all the way with the second line of attack (on the "free rider"), but we can say perhaps that it is presumptuous of the free rider to assert his right to a post of majesty and command. For what the first line of attack asserts is the moral right of B to exact gifts from A, by force if necessary. >Free rider. RothbardVs 2): The second line of attack is of the opposite form - a denunciation of the recipient of the "gift." The recipient is denounced as a "free rider," as a man who wickedly enjoys the "unearned increment" of the productive actions of others. This, too, is a curious line of attack. It is an argument which has cogency only when directed against the first line of attack, i.e., against the free rider Who wants compulsoryfree rides. But here we have a situation where A's actions, taken purely because they benefit himself, also have the happy effect of benefiting someone else. Are we to be indignant because happiness is being diffused throughout society? Are we to be critical because more than one person benefits from someone's actions? Free rider: After all, the free rider did not ask for his ride. He received it, unasked, as a boon because A benefits from his own action. To adopt the second line of attack is to call in the gendarmes to apply punishment because too many People in the society are happy. In short, am I to be taxed for enjoying the view of my neighbor's well-kept garden? Rothbard III 1037 Georgism/Henry George: One striking instance of this second line of attack is the nub of the Henry Georgist position: an attack on the "unearned increment" derived from a rise in the capital values of ground land. The argument of the Georgists is that the landowner is not morally responsible for this rise, which comes about from events external to his landholding; yet he reaps the benefit. The landowner is therefore a free rider, and his "unearned increment" rightfully belongs to "society." Setting aside the problem of the reality of society and whether "it" can own anything, we have here a moral attack on a free-rider situation. >Henry George, >Georgism/Rothbard. RothbardVs: The diffculty with this argument is that it proves far too much. For which one of us would earn anything like our present real income were it not for external benefits that we derive from the actions of others? Specifically, the great modern accumulation of capital goods is an inheritance from all the net savings of our ancestors. Without them, we would, regardless of the quality of our own moral character, be living in a primitive jungle. 1. For some unexplained reason, the benefits worried over are only the indirect ones, where B benefits inadvertently from A's action. Direct gifts, or charity, where A simply donates money to B, are not attacked under the category of external benefit._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Economic Theories Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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> Counter arguments against Economic Theories
> Counter arguments in relation to Free Market
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