Free Market Myth?

[Ellainix]

Just saw these two videos, he says there is no such thing as a free market?

http://www.youtube.com/watch?v=6ig4HEFsOkU Part 1
http://www.youtube.com/watch?v=whhGoRfuuTw Part 2

I'd like to know what most of you guys think on this subject. I think I should get a second opinion before I blindly agree with everything I was just told.

[Will]

There's no such thing as a pure free market. What we have right now is a mixed capitalist system; there is a market which is mostly free but has some reasonable restrictions in place simply to ensure consumers not be victimized. In a free market, everything from insider trading to selling tainted food would be legal. I don't particularly like that idea, so I'm okay with the government asserting some control over the market.

My best understanding is that there must be a balance in power between government, market, and people. When one or two gain too much power, things tend to go awry. A this moment, there's a bit too much power in the market and not quite enough power with the people (and arguably a bit too much power with government). If the trend of power imbalance continues, eventually there will be revolution and the balance will be restored. If the trend is reversed, balance may not be restored, but we've get a lot closer to it.

[AlP]

One site where people who advocate an unregulated free market can be found here. If you read some of the articles and the posts on their forums you'll get a sense of what they're about. On the flip side, though Marxism ultimately failed, Marx and Engels did an excellent job of critiquing capitalism. Marx's "Das Kapital" is a long and difficult read. His close friend Engels provided a (still somewhat difficult) summary.

I recommend wearing one's critical thinking hat at all times when reading this stuff.

Disclosure: I am neither Austrian School nor Marxist.  

[Dagda]

Although we can say that communism failed in the last century, this may not necessarily mean that Marxist ideas need to fail. Marx always dreamed that his communist paradise would arise in an industrial country like the U.K., France or U.S.A. Instead it arose in the peasant-dominated Russia, China, Eastern Europe and South-East Asia. As such, the original blue-prints (Das Kapital, The Communist Manifesto) had to be altered by power-hungry men (Mao, Stalin etc) which presented problems.

My argument is always that the U.S.S.R. was the test-run. The Wright brothers did not take off in a jet, and neither does the test-run of a political system achieve its full potential. In already difficult conditions (see above) made worse by the ‘Old Guard’ interference, the test-run was a disaster. However, Russia wanted to remain the main communist super-power, and therefore crushed any communist regime which was not Soviet enough (happened several times in Eastern Europe). This is almost like, after their first flight, the Wright Brothers went around shooting other pilots to maintain their monopoly on aviation, and the huge train company (America) stomped on any planes the Wright Brother missed. Communism did not work for two reasons; the Marxist ideal is far too naive, misunderstanding the human condition; and that the capitalist enterprise ensured that socialism would never be given a chance.

I myself am not a Marxist, but I was brought up in a Left-wing environment hence thought I may as well speak up in defence of good old Karl.

[Sheeplauncher]

I think the austrian school has it merits. Its never been truly tried out. Its certainly better then keynesianism imo

[Jolly Sapper]

I'm not much of an all or nothing person.  Keynesian does have its uses, like during a recession or depression (the government becomes the buyer of last resort.)  Markets have always been around where ever two entities have made a trade.  

The idea that markets work best where there are absolutely no rules dictating any part of the transaction or market participants is as ridiculous as having a market being completely controlled by some outside entity ( a centralized economy).  I'm never really sure why this issue has become bound by a dichotomy.  Centralized has its merits, decentralized has its merits, so why not consider them two tools in the tool bag of economic policy and use them as needed?

[AlP]

I wonder if this might be a way to justify state intervention to laissez-faire free market proponents. Consider the state to be a corporation with its tax payers (largely its citizens) as equal shareholders. The state's primary economic responsibility is then to act in the economic interests of its shareholders. It becomes a kind of free market with the state protecting the interests of individuals.

State economic policy is useful for some things, like regulating securities (by standardizing them for example), providing a central bank, controlling interest rates, selling sovereign debt, providing insurance on cash investments, etc.

I do question subsidies and the imposition of trade deficits.

[Will]

The neoliberals I regularly debate with wouldn't have that kind of argument because they love the "use vs. them" of the market vs. the government. Mises would be turning in his grave of American libertarians started admitting that the government has significant roles to play in society, roles which the market is simply impotent in.

[Prometheus]

I like the concept of Marxism and socialism a hell of a lot more than I like what we have now(In the U.S.). The problem is that when any system is put into practice it has to deal with human nature. The challenge then would be to create a system which minimizes the negative effects of human greed and corruptability.

It seems like all the nations which claim to be socialist states that are or have been in existence achieve nothing close to a true socialist state. The goal of socialism is a nearly uniform distributuion of wealth and within these nations this is never really achieved(As best I can tell Cuba is ran almost like its dictator's private business instead of its societies business. I imagine that social stratification is still present as well.). Because of this I believe they are very poor examples of what such a state might be capable of becoming.

In the U.S. there is this almost superstitious fear of all things socialist, communist, or anything different from our present system. I truly believe our leaders and the media have gone out of there way to brainwash us against such things. Its the definition of a conspiracy. The goal would seem to be to keep the rich wealthy and in power and to keep the working classes working hard but not gaining much of anything from one generation to the next.

http://en.wikipedia.org/wiki/File:Anti- ... _color.jpg Theres an insteresting poster on this page regarding capitalism.

[Sheeplauncher]

@Jolly Sapper

It has been proven Keynesianism does not work during recessions. I would point out the lost decade in Japan where they bailed out many people and the government was "buyer of last resort" as you say yet it tanked their economy into a further hole. Now if you take Taiwan which is a country whos GDP continues to rise even during this world crisis and is still doing quite well. Taiwan was successful for many reasons: 1) tight inflation controls(something the austrian school advocates). 2) They phased out government owned business (which is something that keynes advocated for) 3) strong property rights laws 4) They had a very free labor market 5) very laid back attitude on collection/enforcement of sales tax and income tax. Now yes they were somewhat of a hybrid but they did the exact opposite of what kenesianism advocates. I agree that no system is perfect but the free market can work very well to a certain extent for most things via the laws of supply and demand. It does not always work and you will still need government infrastructure and other institutions. The US constitution was made to work the government having as little power as possible. The more power you give the government the more it can trample on civil liberties and abuse its power(Patriot Act, FISA, etc). In my opinion progressive libertarianism is the way to go about fixing our economic problems.

@Will
Agreed to an extent with that. As a libertarian i don't think the government should have a large role but it certainly does have a role to play.

[Jolly Sapper]

Well Sheeplauncher if a hybrid works, why say that one way works while the other won't?
 

As far as I remember from my econ classes Keynesian policy was fiscal policy which is used to play with inflation/deflation.

As far as I remember from my econ class "Free Markets" are all or nothing.  Any regulation in a market means that the market isn't "free."  

That market failures, like the private sector not providing things like education and adequate health care to a society, exist seem to shoot down the idea that free markets provide the best for everybody in a society.  

Then there is the political conflict between a democratic society and the free market.  When the free market does things that hurt large numbers of a society then the society loses faith in the free market.  The society does things like push for tariffs to trade, higher corporate taxes, unionization, etc.

So it seems to me that market systems work best when there are at least some regulations, thoughtfully created and hopefully not enacted in a panic.  I'm not a believer in a centralized economy which isn't Keynesian at all (I'm not sure why this is equated with a centralized economy), but I don't see why the government shouldn't act in times of crises to do its job.  I also don't have a problem with a the government (as the US is a democracy, however dysfunctional) spending money in certain sectors of the economy to create change. (Think subsidizing the solar and wind industry through tax credits for both manufacturers/consumers).

[Sheeplauncher]

First of all America is a Republic not a democracy. Democracy was something most of the founders said was a terrible idea:

"Democracy... while it lasts is more bloody than either aristocracy or monarchy. Remember, democracy never lasts long. It soon wastes, exhausts, and murders itself. There is never a democracy that did not commit suicide" (John Adams).

It is not a legitimate role of government to step in to prop up the economy.... Please point me to the section in the constitution that say so. Spending money to create prosperity fundamentally makes no sense. The money they are using is money created by the federal reserve which isn't real money because it actually isn't printed and is just "created" causing much harm to the economy.

Sorry i re-read my position before and it made no sense. Let me clarify. The free market can solve about 95% of all market problems via the laws of supply and demand. Obviously some institutions are needed to maintain certain services. The free market can provide education just fine. The current system which government bureaucrats running things has brought costs up and not solved the problem. There is no competition so free market forces cannot operate in that market. Same thing for health care. A free market has never operated in the health care industry. Insurance companies cannot compete across state lines. So lets say you have 2 companies in Iowa for example(making this up because i don't know how many there are). But the 2 companies can both charge the same amount for coverage and have no incentive to lower prices because they do not have to compete with anyone. All Iowans are basically forced to get health coverage if they can afford it with the current system making the insurance companies money and prices never go down because Supply and demand are not operating. I hear everyone saying the problem is the free market and the free market does not work. But the thing is the problem is the government. We have never had a true free market because of excessive regulations etc. If the free market could operate costs would go down and supply and demand would work. An example of a free market working very well is in the Eye(optometry) industry. Costs have gone down significantly and technology and quality of care have gone significantly. The eye industry is the most unregulated industry in health care and yet it is working very very well.

Edited for some spelling and to make it easier to read

[Jolly Sapper]

Just to be nit picky:
A representative democracy is a republic.  I'm positive that a republic is a subset of democracy.

It is not a legitimate role of government to step in to prop up the economy....  

I prefer to use whatever tools are available to complete my objective.  The government makes a nice sledgehammer or dump truck when it needs to be.  The recent financial failures would have lost a lot of people their retirement money, business owners their businesses (due to the sudden loss of all their credit and/or the debtor deciding to collect in full everything that it was owed before it went under).  People did lose their savings and did lose their businesses but I'm of the opinion that there would have been many more people hurt without the government stepping in.

Now, I still don't understand how something that has no rules like the "Free Market" is supposed to, makes sense.  If two entities don't know what game is being played then how would any transactions happen?

[Sheeplauncher]

Yes you are correct people would have lost lots of things if bailouts etc were not used but you are not getting to the root cause of the problem. Yes bailouts etc will stave off depression/recession in the short term but it will persist until all bad assets and transactions are dissipated and unemployment goes down. The root cause of the problem is the government itself. It caused the recession and we wouldn't be bailing out corporations in the first place if wasn't for them. They eliminated the Glass-Steagall act enabling banks to make risky trades such as mortgage backed securities. Also the government has the FED in place which sets artificial interest rates and pumps fake money into the system.We have a managed economy, inflationary system, and massive corporatism yet everyone blames the free market when in fact the Fed has monopoly control of money and credit without congressional oversight.  Heres an analogy i heard for the fed: "if a teacher gives kindergarten kids a bunch of soda and pixie sticks and then leaves and comes back and the classroom is wrecked then who do you blame". Thats basically what the fed did and set interest rates low enough and gave people "free money" and let them leverage it up where corporations could make risky deals.

Besides bad fed policy we are fighting 2 wars, have hundreds of bases across the world and we spend billions to maintain our global empire of bases and all empires fail eventually and we are in decline. The free market can address the problems because if there is demand for something then someone will take advantage of the situation and supply that demand.  You say it does not make sense and you claimed to have taken economic classes. So No doubt you understand that the laws of supply and demand cause the free market to work. If there is a demand for something then someone will step in to fit that market thus making money... The first thing they say in econ101 is that "there is no such thing as a free lunch" yet many people still see this as attainable as we pump billions of dollars into the public sector(the unproductive sector) yet it does nothing and unemployment keeps going up. We barley produce anything as a country and borrow billions of dollars from the rest of the world and keep blowing it on consumption.

We simply cannot go on the current course because once the dollar is abandoned as the world reserve currency our economy will crash very hard.We are already seeing moves especially in Asia to get rid of dollars. The central bank in india just bought a shit ton of gold because they do want to be holding onto dollars since soon they will be worthless from massive inflation since our debt is 12 trillion dollars and as far as alternatives a free market is far better then the current system.

[SSY]

To be honest, those videos were dripping with so much agenda and obvious bias, that I had a hard time taking them seriously.