Free Market.
Free Market
A lot of confusion is generated by the derivation of "Free Trade" from the original "Free Market" theories such as Milton Friedman's. Pure theory can be lovely and promising. Hence, Prof. Friedman of the University of Chicago's 'monetarist' school of economics, could say on November 1, 1991:
We are being misgoverned in all these areas but not because of bad motives or bad people. The people who run our government are the same kind of people as the people outside it. We mislead ourselves if we think we are going to correct the situation by electing the right people to government. We will elect the right people and when they get to Washington they will do the wrong things. You and I would; I am not saying that there is anything special about them.
The important point is that we in our private lives and they in their governmental lives are all moved by the same incentive: to promote ourown selfinterest. Armen Alchianonce made a very important comment. He said, "You know, there is one thing you can trust everybody to do. You can trust everybody to put his interest above yours." That goes for those of us in the private sector; that goes for people in the government sector. The difference between the two is not in the people; it is not in the incentives. It is in what it is in the selfinterest for different people to do.
In the private economy, so long as we keep a free private market, one party to a deal can only benefit if the other party also benefits. There is no way in which you can satisfy your needs at the expense of somebody else. In the government market, there is another recourse. If you start a program that is a failure and you are in the private market, the only way you can keep it going is by digging into your own pocket. That is your bottom line. However, if you are in the government, you have another recourse. With perfectly good intentions and good will nobody likes to say "I was wrong" you can say, "Oh, the only reason it is a failure is because we haven't done enough. The only reason the drug program is a failure is because we haven't spent enough money on it." And it does not have to be your own money. You have a very different bottom line. If you are persuasive enough, or if you have enough control over power, you can increase spending on your program at the expense of the taxpayer. That is why a private project that is a failure is closed down while a government project that is a failure is expanded.
Of course, he was talking during the Clinton years, to a business audience, and the needling about government power turning people into just the same as their predecessors was meant to imply that Democratic administration was no better at promoting prosperity in the populace than Republicans had been. Althought the Clinton era proved him wrong, doubtless he never noticed, and sailed on into w's era sure that his ideas would be proved right. Au contraire.
We can see the validity of this only if we compare the cretin in chief's supposed principles with what he actually did. Working under the guise of promoting Free Market economics, the last six years under w's administration has ripped up the security of protections of all varieties, undermined the mechanics of government and ignored the judicial branch and its rulings.
The ability of men acting freely to determine their own fates by acting in self-interest, ignores the basic facts of market economy, that in addition to promoting themselves the business entity will undermine the opposing entities. Prof. Friedman, needless to say, never managed a business. He promoted himself by attracting the greatest numbers of admirers, and the businessmen who needed to undermine humane government used him to the fullest.
Look at his earlier postulation in this same speech;
Hong Kong's completely free economy has achieved marvels. Here is a place with no resources except a magnificent harbor, a small piece of land, an island offs peninsula, a population of 500,000 after World War II that has grown to a population close to six million - over ten times as large and at the same time, the standard of life has multiplied more than fourfold. It has been one of the most rapidly growing countries in the world, a remarkable example of what free markets can do if left unrestricted. I may say that Hong Kong is not a place where most of us would want to live. It is not a place where most of the people there want to live. It is very crowded; it is a very small area. If other places would take them, the people would love to go. However, the remarkable thing is that under such adverse circumstances they have done so well.
In addition to economic freedom, Hong Kong has a great deal of human freedom. I have visited many times and I have never seen any evidence of suppression of freedom of speech, freedom of the press, or any other human freedom that we regard as important.
Of course, now Prof. Friedman would probably have chosen the Caymans as the illustration of perfect free market economy, and look how it is prospering by offering a haven for funds which are being kept from taxation in the lands where they originated or to which they are due, as being a product of that country's resources and/or personnel.
Economics is pretty generally dismissed as being a philosophy but hardly a science. However, it is cited by those who can use its philosophers to cement their own gains as absolute science.
Sorry, Prof. Friedman, your 'free' markets have disproved your theories.
A lot of confusion is generated by the derivation of "Free Trade" from the original "Free Market" theories such as Milton Friedman's. Pure theory can be lovely and promising. Hence, Prof. Friedman of the University of Chicago's 'monetarist' school of economics, could say on November 1, 1991:
We are being misgoverned in all these areas but not because of bad motives or bad people. The people who run our government are the same kind of people as the people outside it. We mislead ourselves if we think we are going to correct the situation by electing the right people to government. We will elect the right people and when they get to Washington they will do the wrong things. You and I would; I am not saying that there is anything special about them.
The important point is that we in our private lives and they in their governmental lives are all moved by the same incentive: to promote ourown selfinterest. Armen Alchianonce made a very important comment. He said, "You know, there is one thing you can trust everybody to do. You can trust everybody to put his interest above yours." That goes for those of us in the private sector; that goes for people in the government sector. The difference between the two is not in the people; it is not in the incentives. It is in what it is in the selfinterest for different people to do.
In the private economy, so long as we keep a free private market, one party to a deal can only benefit if the other party also benefits. There is no way in which you can satisfy your needs at the expense of somebody else. In the government market, there is another recourse. If you start a program that is a failure and you are in the private market, the only way you can keep it going is by digging into your own pocket. That is your bottom line. However, if you are in the government, you have another recourse. With perfectly good intentions and good will nobody likes to say "I was wrong" you can say, "Oh, the only reason it is a failure is because we haven't done enough. The only reason the drug program is a failure is because we haven't spent enough money on it." And it does not have to be your own money. You have a very different bottom line. If you are persuasive enough, or if you have enough control over power, you can increase spending on your program at the expense of the taxpayer. That is why a private project that is a failure is closed down while a government project that is a failure is expanded.
Of course, he was talking during the Clinton years, to a business audience, and the needling about government power turning people into just the same as their predecessors was meant to imply that Democratic administration was no better at promoting prosperity in the populace than Republicans had been. Althought the Clinton era proved him wrong, doubtless he never noticed, and sailed on into w's era sure that his ideas would be proved right. Au contraire.
We can see the validity of this only if we compare the cretin in chief's supposed principles with what he actually did. Working under the guise of promoting Free Market economics, the last six years under w's administration has ripped up the security of protections of all varieties, undermined the mechanics of government and ignored the judicial branch and its rulings.
The ability of men acting freely to determine their own fates by acting in self-interest, ignores the basic facts of market economy, that in addition to promoting themselves the business entity will undermine the opposing entities. Prof. Friedman, needless to say, never managed a business. He promoted himself by attracting the greatest numbers of admirers, and the businessmen who needed to undermine humane government used him to the fullest.
Look at his earlier postulation in this same speech;
Hong Kong's completely free economy has achieved marvels. Here is a place with no resources except a magnificent harbor, a small piece of land, an island offs peninsula, a population of 500,000 after World War II that has grown to a population close to six million - over ten times as large and at the same time, the standard of life has multiplied more than fourfold. It has been one of the most rapidly growing countries in the world, a remarkable example of what free markets can do if left unrestricted. I may say that Hong Kong is not a place where most of us would want to live. It is not a place where most of the people there want to live. It is very crowded; it is a very small area. If other places would take them, the people would love to go. However, the remarkable thing is that under such adverse circumstances they have done so well.
In addition to economic freedom, Hong Kong has a great deal of human freedom. I have visited many times and I have never seen any evidence of suppression of freedom of speech, freedom of the press, or any other human freedom that we regard as important.
Of course, now Prof. Friedman would probably have chosen the Caymans as the illustration of perfect free market economy, and look how it is prospering by offering a haven for funds which are being kept from taxation in the lands where they originated or to which they are due, as being a product of that country's resources and/or personnel.
Economics is pretty generally dismissed as being a philosophy but hardly a science. However, it is cited by those who can use its philosophers to cement their own gains as absolute science.
Sorry, Prof. Friedman, your 'free' markets have disproved your theories.
Labels: Free Markets
posted by Ruth at 5:18 AM
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