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In
defending the ideal of a free society with a minimal state, free
market enthusiasts are sometimes accused of being utopian, of
presenting an impossibly perfect vision of what such a society
would be like. We are accused of having blind faith that the
market will somehow magically solve all of our problems. In fact,
while economic and personal liberty is an ideal—and one that
deserves to be depicted in all its glory—a free market society
is emphatically not utopian for two important reasons. First,
free markets are not perfect; they are merely better than any of
the alternatives. Second, free markets do not need to wish away
all human weaknesses in order to function.
The 16th century book by
Sir Thomas More whose title gave us the word "Utopia" is
actually two very different books. In the first book, we are
treated to a lively dialogue brilliantly ridiculing all the
power-grubbing machinations of government officials and arguing
about the best way to effect positive change. It wisely warns
that societies will never be perfect because human beings are
not perfect, but recommends that we should still try our best to
resist negative changes and promote positive ones. In the second
book, however, we are shown a vision of a radical, socialist
society. On the island of Utopia, money does not exist, and a
whole slew of positive effects (and no negative ones) is simply
assumed to follow from this: everyone happily works for the good
of all, there is plenty to go around, and government officials
perform their duties with integrity and intelligence.
One is left to wonder
what happened to the wise counsel of the first book, which
cautioned that human beings would not work without the incentive
of personal gain. One also wonders how this Utopia would deal
with coordination problems in the absence of market prices, and
what happened to government corruption, which is not primarily
about money but about power. In stark contrast to the warning of
the first book, human beings in the state of Utopia are angelic:
they are willing to work hard without proper incentives; they
are able to produce everything that is needed without proper
information; and they are able to resist the lure of power far
better than the members of any society in the real world ever
has. There is no plausible explanation of how human beings are
supposed to act in ways so contrary to their nature, or of how,
in the absence of price signals, producers are to know what and
how much to produce given unavoidably limited inputs.
As was made devastatingly
clear from the tragic socialist experiments of the 20th century,
socialists were wrong to assume that money and property are the
sources of conflict, and that by doing away with these, conflict
would disappear. They were wrong to assume that it is possible
for humans to strive without the incentive of personal reward.
They were wrong to imagine that production could be efficiently
organized from the top down without market price information.
And they were wrong to think that government corruption would
disappear with the removal of money from the equation. In
practice, societies that have tried to impose egalitarian
visions have displayed more, not less, corruption, as power was
the only thing left to compete for; they have had insurmountable
knowledge problems in the absence of market prices; and, having
ruled out the use of "carrots" to motivate people, they have had
to resort to the most brutal of "sticks," imprisoning, enslaving,
and murdering millions of their own citizens. The solution to
the problems that beset humanity is clearly not just to share
everything—especially when that sharing takes place at the
point of a bayonet.
Societies cannot be
perfect because human beings are not perfect. Far from denying
this, free market enthusiasts accept this and argue that the
best kind of society for us imperfect humans is a free one,
precisely because it allows for the easiest and least painful
course corrections. Competition allows for and in fact
encourages the discovery of better ways of doing things. Free
societies harness the personal reward incentive and channel it
toward the good of all. The only way to get ahead in a free
market is to serve others, to provide them with goods and
services they actually want to buy.
Free markets are not
perfect, but no one is claiming that they are. We enthusiasts
simply believe that the so-called "failures" of markets are in
fact just the shortcomings of imperfect human action itself, and
hence are not unique to free markets at all, but something that
all systems must deal with. The difference is in how well
free markets deal with problems compared to all other systems.
The closest approximations of egalitarian, socialist societies
have brought increased misery through the use of brutal "sticks"
and inefficient production. The closest approximations of free
market societies have brought decreases in suffering through the
use of "carrots" and ever greater, smarter productivity.
A free market society
supported by a minimal government that only uses force in
retaliation against thieves and thugs is not a utopian fantasy;
it is the best realistic way to organize a society for
the good of all. But is it perhaps unrealistic to hope that
bloated, corrupt governments can be pared down to more
reasonable proportions? How do we rein in the undue influence of
certain unscrupulous large corporations that extract special
privileges for themselves at the expense of their competitors,
thereby undermining the benefits of true competition? The
solution is simple to state, though admittedly more difficult to
implement: if governments have fewer goodies to dispense, large
corporations will have less reason to corrupt the political
process. What is needed for this to happen is a sea change in
the way people perceive governments, and the abandonment of the
notion that we should try to address our problems with coercive,
top-down, one-size-fits-all solutions that solve nothing.
Changing people's ideas is not easy, but it is possible, whereas
trying to eliminate the competitive, self-improving nature of
human beings as egalitarians would have us do—if such a thing
were even desirable—really is utopian.
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