Note: There is a cadre of GOP conservatives who looked at the landmark victories by Democratic candidates in 2006 and drew the conclusion that conservatives (which these days is a term automatically interchangeable with Republicans) lost their Congressional majorities by abandoning their dedication to core principles. To regain their momentum, these stalwarts believe, they need only convince voters they've come back to their principles. This is the second diary in the ongoing look at the bedrock ideas behind today's conservative movement, with an eye to explaining how each is grounded in myth and misinformation and for the most part, provably wrong factually.
Today's Lesson: The Market Myth
The world might today be a saner place had Adam Smith toiled in obscurity, but then again, I suppose things might be worse. Still, Smith and those who followed and expanded his ideas and came to look upon them as holy writ, have done us much harm. They've elevated the the concept of free markets -- and their inherent power to cure all ills -- to the status of an unquestionable truth. Yet finding a successful real-world example of Smith's idealized market is a formidable task.
Smith's original fundamental idea, from The Wealth of Nations, was that everyone in an economy acts out of self-interest and that the collective effect of this is a smoothly functioning economy that meets the needs of a population most efficiently and will, over time, maximize prosperity for all. This principle assumes decision makers (whether people or nations) have the information they need to act in their self-interest, and also that they have broad freedom to act in their own self-interest. This is, of course, a simplified synopsis of a complex idea, but it remains the essence.
We all of course, act out of self-interest. The Adam Smith thesis, however, assumed -- and his followers assume -- a certain kind of self-interest. This idealized self-interest is best characterized as advantage. It is increased wealth, for example, or better health care, or more property, a better education, or higher social status. Direct personal, familial or national advantage. But is that what motivates people or nations? It doesn't account for altruism, or charity, fear, stupidity, ignorance and any number of other things that motivate actual people, in addition to the drive to get more than you give. Many are animated by something other than greed.
Similarly, it seems self-evident that in a market free of rules, not every decision maker will have adequate information on which to base his actions, perhaps because the information is scarce, or because it is deliberately withheld or obscured. Even if a nation or individual is pursuing self-interest, without all the available information, decisions can and will go awry.
The "free" market theory also assumes reasonably equal economic power -- that an individual or nation is free to act in his own interest by choosing freely among competing options. In real life, that freedom to choose is almost always limited in some way. If you've been in an accident, you're in no position to shop for a hospital or a doctor. You can switch electrical power providers if you don't like the fact that their building another coal-fired plant. If you're clinging to a job knowing that if you lose it or change jobs your chronically ill child will forfeit health care insurance and not be insurable because of the condition, can you "vote with your feet" with an abusive employer?
For these reasons and others, there is almost no example of a truly free market -- one without regulation and driven solely by the much-revered market forces. Would you invest on Wall Street without the SEC rules governing disclosure (it's sometimes perilous even with them)? And let's not forget that the cost of that regulation is borne by taxpayers, many of whom see no direct benefit, because they neither invest or receive any investments.
The next time some conservative shill gives you the free market lecture, ask for a single example of a market that really works without some regulation. If such a thing exists, I'd wager that its so small and obscure that few people are aware of it.