Monday, June 27, 2005

Freedom and Markets

Markets are, in many respects, the ultimate manifestations of negative freedom. Individuals are free to make voluntary exchanges with others, and nobody is explicitly forced to do anything. It's great -- as far as it goes. In this post, I will argue that markets are necessary but insufficient for freedom.

There are two broad autonomy-based arguments for the market: the first invokes market neutrality, the second: perfectionism and the development of autonomous character. Hayek argues compellingly for the first approach:
The recognition that each person has his own scale of values which we ought to respect, even if we do not approve of it, is part of the conception of the value of the individual personality. How we value another person will necessarily depend upon what his values are. But believing in freedom means that we do not regard ourselves as the ultimate judges of another person's values, that we do not feel entitled to prevent him from pursuing ends which we disapprove so long as he does not infringe the equally protected sphere of others.

However, when push comes to shove I don't think many of us would stand by this view. It implies that we should allow individuals to sell themselves into slavery, sell their body organs, engage in suicide pacts, and so forth. (You can just hear the neutralist arguing, "Hey, if that's what they want for themselves, who are we to judge?") If you hold that autonomy is good in itself, however, then you are not a neutralist. I think this pro-autonomy position is the more plausible one. It would justify preventing people from selling themselves into slavery, for in doing so they would undermine their own autonomy, and - unlike the neutralist - we hold that autonomy has objective value and so ought not to be undermined in such a fashion.

Still, even if we must impose some limits on the market, in general it seems quite supportive of autonomy. Certainly it is preferable to any alternative where individuals get their jobs and roles in life decided for them by some external authority (whether a totalitarian government, or an heriditary caste system). The market removes these barriers to self-determination.

Nevertheless, the market alone is insufficient. As John O'Neill argues, "Hayek elides self-determination with the negative conditions for its exercise". Hayek identifies autonomy with "independence of the arbitrary will of another", but also with the condition of being "moved by reasons, by conscious purposes, which are my own". What he seemingly fails to recognize is that these two concepts are not identical. The former, purely 'negative', condition, does not guarantee that the latter, 'positive', condition also obtains. This reflects my more general complaint that mere non-interference is insufficient to establish genuine opportunities, and only the latter has genuine value.

These considerations move us towards the pro-autonomy 'perfectionist' position hinted at before. On this view, the value of the market derives from its tendency to develop the virtues of autonomous character. Thus Gray argues:
the virtues elicited in market economies are those of the autonomous agent - the person... who is self-possessed, who has a distinct self-identity or individuality, who is authentic and self-directed, and whose life is to some significant degree a matter of self-creation.

There are three problems with this argument. Firstly, it is far from clear whether the market really does develop virtuous character. Adam Smith recognized that tedious labour would dull the capacities of workers, and markets would pamper the vanity of the rich. (He simply thought that these costs were outweighed by the utility of capitalist production.) It also seems plausible that the market encourages meanness of spirit, miserliness, uncharity, selfishness, and a general lack of community-mindedness and concern for others. Further, O'Neill argues that it doesn't even encourage a balanced autonomy:
To use the Aristotelian terminology, the virtues of the autonomous agent must be contrasted not only with vices of deficiency, but also those of excess. Self-identity requires not just the absence of definition by others alone, but also settled dispositions that go to make up the existence of character.

He suggests that "recent accounts of the 'post-modern condition'" indicate the failure of our market society in this regard.

The other two counter-arguments are a bit more straightforward. They concern the value and conditions of autonomy. Basically, freedom only has value insofar as we have worthwhile options to choose between. This is a positive condition that the mere 'negative freedom' provided by the market cannot guarantee. But as it stands this point is merely academic. In practice, market forces will tend to supply valuable goods to meet demand. To have any real bite, the present argument must be supplemented, perhaps by the suggestion that commodification of "educational, cultural, familial and associational spheres" would tend to undermine their intrinsic value. I will not pursue that line of argument here.

Finally, on the conditions for autonomous character, we return to the familiar point about how mere non-interference is insufficient. Indeed, the market presupposes autonomy: it consists in voluntary exchanges between (supposedly) informed and rational agents. Agents are disadvantaged insofar as they lack the fundamental capacities required for market success. It is patently unjust for an individual's capacities, and thus opportunities, to be determined by (parental) wealth.

What justice and autonomy require is that we first establish the conditions required to exercise freedom. That is, the provision of basic needs, top quality education, and so forth. Only then can we hand matters over to the market. As I have recently argued, I think the best way to achieve this would be to institute a universal basic income to complement the free market. The taxes required to fund it could be incorporated into the cost of market transactions. This, I believe, would be the best way to promote real freedom in our society.


  1. I find it a mischaracterization of Hayek to suggest that he would have approved of selling oneself into slavery. Some libertarian theorists have indeed argued this, but not Hayek.

    Indeed, Hayek would have championed the market precisely because it was one example of personal autonomy as you describe it--but he would not have stopped there. Hayek devoted much of his life's work to non-economic subjects (or at any rate, subjects not usually considered to have anything to do with economics). These included works on cognition and sensation, legal theory and the political order, and of what he termed "complex systems," orders that arise spontaneously from a few simple rules, but whose behavior is difficult or impossible to predict completely. These included--no surprise here--markets, politics, and consciousness. He closely identified these spontaneous orders with life itself, which in a way is another spontaneous order.

    If he's right, then autonomy, and even human nature itself, calls for some form of spontaneous order as the presumptively proper solution to a wide range of social problems. Hence his enduring support for the market economy.

  2. markets requrire precxonditions anyway - such as a military and police strong enough to defend them (be it yours or someone elses).
    No system jsut emerges as the best at every level automatically that is pretty improbable philosophically and disproven by history. One must take certain actions in contradiction with the basic method in order to set up the system where the method will prosper because being the best final scenario doesnt mean it would be hte best in every scenario it will face on the way to becoming the end state.

  3. Well, I did write "It [the neutralist view] implies...", rather than "Hayek would approve...". But okay. Thanks for clearing that up.

  4. Genius: Hayek devoted much of his work to studying the rulesets that allowed complex systems to emerge. Unlike many radical libertarians, he believed that these rules--yes, established by government--were actually what made orders like the market possible. It's not that spontaneous order just happens out of thin air. It's that, with the right combination of initial conditions, remarkable and unpredictable things are possible. Thus the actions of setting up a government, and even of initiating force at times, are not necessarily in contradiction to the basic method at all. They're an integral part of it.

  5. A token protest ..
    Quote Richard. … “ .. the provision of basic needs, top quality education, and so forth. Only then can we hand matters over to the market.”
    Even with that, before long the market and wealth acquisition would be dominated by the successful out of proportion to effort put in. It’s just inherent to the economics of space, its not purely a result of personal qualities.
    Markets are the interface where value becomes apparent, but markets care not about the CONDITIONS under which effort and production had to occur. I would prefer to change the production conditions .. not interfere with markets.
    On the other hand Richard , a MBI would reduce the worst effects of inequality, and be a much more generally acceptable approach than some radical adjustment of basics.
    All you have to do is convince the general populace, and ‘the powers that be’ that it can be done without side effects !! Go for it, I say.

  6. Haha
    Jason never fear - I am not really very far left - I just dont follow crowd - so my philosophies depend on where I think the best arguments lie.

  7. I think your precondition of top-quality education is quite right and lends itself to the argument that education itself should not be a commodity subject to the forces of the market.

    This ties in with the idea that the mechanism of the (free) market has the power to destroy the value / efficiency / effectiveness of some goods.

    Take food. Corporations can grow more food by using chemicals and methods which strip them of there nutritional value and sell more food by using chemicals and methods that make them more physically attractive (eg. bright red apples).

    So what we have is a good that has been turned into something that is not only less valuable but may assist in killing us (think McDonalds).

    Supporters of the market might say that this occurs only because of the willingness of people to buy such goods. But I think this is an insufficient response, think of how expensive so-called organic food is.

    But also, the lack of education on nutrition for example provides the supreme disadvantage. It is in the interests of cereal manufacturers to educate school students (no matter how erroneously) that cereal is really good for you and necessary for a healthy diet (think 'Food Pyramid').

    This support the idea that in considering the market the 'informed' or education of the consumer is objectively valuable like autonomy.

  8. > Take food. Corporations can grow more food by using chemicals and methods which strip them of there nutritional value and sell more food by using chemicals and methods that make them more physically attractive (eg. bright red apples).

    There are two things that primarily cause this failure

    1) imbalance of information - this involves the large amount of information we have regarding the size of the food and its colour etc and the relitively low amount of information about its taste/health value. HOWEVER branding consumer organizations and possibly advertising should help to solve that problem in the long term.

    2) stupidity of the average customer - ie we dont correctly weigh hte information we have about its health value against that of its appearance. there is only one solution to this and that is an authority telling you what you can and can't eat. Personally I dont mind that, but I note that is like the 50th step down the track to authoritarianism not the first.

    > think of how expensive so-called organic food is.

    well inorganic food producers can provide food to poor people cheeper than organic food producers can - it is highly likely that despite being less healthy the inorganic food actually does more "good" for example complete conversion to organic foods everywhere could result in mass starvation as food prices moved beyond the reach of poor.

    > It is in the interests of cereal manufacturers to educate school students (no matter how erroneously) that cereal is really good for you and necessary for a healthy diet (think 'Food Pyramid').

    1) I dont think cerial manufacturers are really in control of the school system - they may have influence but probably less than the dairy board the apple and pear organization and the meat organization.htey jsut happen to have at least one fairly strong brand of health scientist who support them. For the most part our health education is a result of health based interest groups gaining control of the system. If they are largely wrong (which I am not convinced of) your problem then is that it is in their interests to peddle their own idea regardless of whether it is right or not. Just like in a "market" situation - although in this case it is money, reputation and influence at stake and the controls are more obscure.

    Take a look at the health food market and see how much snake oil (often things you could disprove with a little science knowledge) is being sold (sometimes they even sell outright poisons or things that WOULD be poisonous IF they had the ingredients they say they have). The things the large companies do are insignificant in comparison.

    > This support the idea that in considering the market the 'informed' or education of the consumer is objectively valuable like autonomy.

    The problem is of course tht no one knows what "educated" is. Ie they dont know what facts are true since they are in dispute. Education is probably good but at some point you end up not teaching facts but instead opinions choped into bite size pieces for the masses be they food pyramid, bottled water, organic food or sheep uteris. It is likely that education wil lbecome the same thing as brain washing which you can do, but you have to keep in mind it has nothign to do with finding a correct answer.


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