(4) Economics and Freedom — Markets between Adulation and Contempt

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Markets are powerful instruments of equilibration. However, their defenders tend to neglect the fact that both the preconditions of and the input into the equilibrating process are subject to political pressures. 

There is no denying it, in terms of overcoming shortages and creating broadly shared wealth market economies perform well compared to other types of economies. However supporters of free markets jump too eagerly to the conclusion that a market economy is naturally productive of an overall socially optimal equilibrium. 

In technologically advanced ages, severe shortages are usually the result of faulty political arrangements, a social order that is not working properly; that is to say, it takes political acumen to create the conditions in which the equilibrating powers of the market become efficacious. 

To the extent that the objectives of social policy and the visions of a good society that we subscribe to are subject to differences of opinion, and most are, markets quite simply cannot be expected to serve as natural providers of socially optimal outcomes. 

The presence of a unique social optimum is both illogical and impracticable in a society based on personal freedom and unlimited orderly dissens—a society whose coherence, peacefulness, and productiveness depend on credible conciliation, settlement and balance between the diverging views and interests of individuals and groups. 

A uniform standard of perfect attainment has no meaning in a free society. Therefore, the idea that an impersonal mechanism would be capable of producing a social optimum is contrary to the nature of freedom.

We are compelled to constantly rearrange and manage those conditions of mutual cooperation, toleration, and conciliation that precede, accompany, and succeed acton in the market. 

For instance, an economy characterised by strong growth that is accompanied by buoyant income increases in the broad population (itself a precondition of strong economic growth) depends on political institutions that ensure a balance between the interests of capital and those of labour, none of which interest group ought to be allowed to achieve preponderance. While both sides may feel hard done by when finally agreeing to a compromise, hindsight may reveal that the parties have profitted from the once deplored arrangement more than from any other outcome. People will learn to cultivate trust and the art of reconciling the irreconcilable to mutally gain in the absence of a perfectly satisfactory common denominator.

In doing so they constanly change the matrix within which market activities take place. How could they not, if they are free human beings entitled to expressing their concerns?

It is advisable to be critical of adulating accounts of the market system based on economic models that ignore the matrix of pre/extra/non-economic forces within which markets operate. At the same time, one should never lose sight of the benefits, and indeed indispenability, of markets in a free and prosperous society. 

Yet, supporters of the free market tend to botch their account of that welcome social instrument by ascribing to it perfection and infallibility, and attributing all its failings to arbitrary human interventions into its natural logic — which is wrongly assumed not to depend on significant extra-economic influences.

By contrast, those critical of markets are often apt to overshoot in their rejection of the market system.

The "Left" think markets are worse than they really are. 

The "Right" think markets are much better than they are. 

Both believe in a perfect solution — 

a world relieved of markets, and

the market as the good society's autopilot, respectively. 

To keep their "solutions" perfect, both camps strive to crowd out the factors that make markets powerful in a socially controllable and considerate fashion. 

Markets do not work without political input, while the wrong kind and dosage of political input destroy them. 

The "Right", believing in the self-directing nature of markets, err on the side of insufficient political control of markets, whilst the "Left", having no confidence in the market, err on the side of replacing or damaging market processes by political fiat. 

Markets are at their best in a world of compromise. 

It is not a design error attributable to markets that people, individually as well as members of groups, have differing and clashing views and interests. 

People must be given reasonable conditions to tone down their conflicting aspirations, which is the foremost task of freedom and her political order. The better the politics of give and take, the greater the benefits provided by markets and the better the distribution of these benefits among all concerned.

Good markets do not happen just like that. They presuppose a free pluralistic society.