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Writes Armen Alchian in a contiguous paragraph to which I have added brackets - [A] etc. - and breaks:
[A] I know of no way to reduce the prospective enhancement from greater political power-seeking, but I do know ways to reduce the rewards to market-oriented capitalist competition.
[B] Political power is dominant in being able to set the rules of the game to reduce the rewards to capitalist-type successful competitors. It is rule maker, umpire, and player …
[C] But I have been unable to discern equivalently powerful ways for economic power to reduce the rewards to competitors for political power!
The Collected Works of Armen A. Alchian, Volume 2, p. 604
As for [A], the statement is manifestly wrong. Its resigned defeatism is not uncharacteristic for a political disposition that dramatises the endangerment of "free markets," considering the latter to be chronically disadvantaged by political machinations and sliding down an eternal chute to perdition.
This is not to denigrate efforts at defending free markets where they are at peril or politically hampered and distorted. The problem, however, is that "the left" often fail to acknowledge and actively defend the merits of markets, whereas "liberals" (European sense of the word) tend to overdraw the extent to which the efficient and self-healing automatisms of markets are of a genuinely stand-alone character, tempting them to feel that "leaving them alone" (laissez-faire) is bound to bring about the first-best solution compared to political interference.
Markets work well--the liberals are right to claim, but they are inherently political--the left is correct in pointing out, though not necessarily in ways that support a simplistic juxtaposition of oppressors and oppressed.
While "capitalists" are engaged in more or less effective lobbyism, "the left" is often succeeding at thwarting competitive markets for efficient producers, say of energy, thereby foiling economic conditions conducive to the public and, in the chosen example, oppressing the less well off and the poor with unaffordable energy prices.
As Adam Smith noted correctly, capitalists have no intrinsic preference for capitalism (laissez faire) either. If the power of the state ensures them safe niches, why should they favour the cold winds of competition?
As Adam Smith noted correctly, capitalists have no intrinsic preference for capitalism (laissez faire) either. If the power of the state ensures them safe niches, why should they favour the cold winds of competition?
Coming back to [A], it is not true that there are no means
to reduce the prospective enhancement from greater political power-seeking ...
The modern liberal state is one vast exercise in putting limits on excessive power-seeking.
It is awkward that those who profess a particular concern for liberty, often show too little sensitivity to be able to discern
- the huge success of the modern state in containing illegitimate power seeking
from
- the exceptions to this success story.
These exceptions are typically extrapolated to counter-factually imply a complete lack of power containment - just as insinuated in Alchian's pronouncement.
As for [C],
... I have been unable to discern equivalently powerful ways for economic power to reduce the rewards to competitors for political power!
Alchian's lack of success in discerning any such rewards is due to his looking for the wrong thing.
Economic activity is inherently political. Markets are not like Platonic forms - ideal structures that exist by themselves, and emerging in their pristine natural shape when people refrain from political interference with them.
Economic activity is inherently political. Markets are not like Platonic forms - ideal structures that exist by themselves, and emerging in their pristine natural shape when people refrain from political interference with them.
Markets are launched politically, they are maintained politically, they are changed politically, and they may be dying for political reasons. Every market is embedded in the state's infrastructure that seeks to protect citizens from other citizens' transgressions.
Logically, this is a political and legal condition that must be operative before the automatisms of markets can function the way they are supposed to. Practically, politics and economic activity will be interlocked.
Logically, this is a political and legal condition that must be operative before the automatisms of markets can function the way they are supposed to. Practically, politics and economic activity will be interlocked.
Why? Because of [B].
As for [B],
Political power is dominant in being able to set the rules of the game to reduce the rewards to capitalist-type successful competitors. It is rule maker, umpire, and player …
Economic activity proper is distinct from rule making, umpiring, playing for political weight and advantage. Such separation is not due to some evil machinations, rather it lies in the nature of the matter.
Markets happen once the necessary rule making and umpiring and lobbying has settled into a continuous order. Markets to not engage in rule making and umpiring and lobbying, and factories do not produce these services; it is the competing and negotiating encounters of humans outside of markets that establish an order within which economic activity may unfold.
Markets happen once the necessary rule making and umpiring and lobbying has settled into a continuous order. Markets to not engage in rule making and umpiring and lobbying, and factories do not produce these services; it is the competing and negotiating encounters of humans outside of markets that establish an order within which economic activity may unfold.
The ultimate dominance of political power in the economy is not a regrettable exception to be dispensed with by a superior social system, it is the fundamental condition of economic activity in any human community.
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