What Are Markets?

Man and politics came before markets! If we wanted to, we could organize a social system of greater equality.

So says Robert McGregor in a comment thread over at Marginal Revolution.  Well, McGregor actually said inequality, not equality, but I edited it out as I presume it is a mistake.

I pick out these sentences as a pithy summation of a general difference between libertarians and everyone else — most prominently liberals/progressives, but to a large degree also conservatives whose principal understanding of economics is not libertarian in origin.

Obviously, in a reductionist sense, McGregor is correct.  Man preceded markets and politics, meaning any kind of human interaction, preceded at least any significant markets.  In another sense, this is unimportant, because markets, as a libertarian means them, more or less are what fill the spaces between people — you can no more remove them than you can remove your own shadow.  The fact that you cast it is to some degree unimportant.  Markets are the negative space of human society, and yes, they could not exist without human society, but that doesn’t mean human society can get rid of them.

Imagine packing marbles in a crate.  There is always going to be air-space in the crate, no matter what the size of the shape or how it is arranged.  The only way to abolish the air space would be to crush the marbles into cubes — which is a pretty good metaphor for how libertarians think you could abolish markets.

To some extent this is definitional.  In this sense, when we say “markets,” we mean “whatever arises from humans acting in their own self-interest.”  People will always act in their own self-interest, so there will always be something there.  People of other political persuasions will, I suspect, eventually agree that it is impossible to abolish self-interest, they would just argue that some configurations of self-interest are not markets.

Specifically, technocrats believe that if they can just write enough of exactly the right rules, they can close off all avenues of illegitimate self-interest.  Idealists believe that they can succeed in moral suasion that will convince people that genuine self-interest involves acting in only in legitimate ways.  Libertarians, instead, believe that what you should do is get people’s self-interest right out there in public and fully in view, because you aren’t going to tame it — but maybe the actions of millions of other people can do what you can’t with rules or suasion.

There is a temptation, both among the political opponents of libertarians and among libertarians themselves, to conflate the inevitable and the desirable.  Cowen thinks that if technology follows the path he suggests, something like the future he describes is inevitable.  McGregor, because he thinks of society as more susceptible to productive, directed change than Cowen does, accuses Cowen of thinking that future is desirable.  This is, I think, the chief difference between libertarians and materialist liberals.


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