Nothing is free in this market.

The term “free-market economy” is a misnomer. The name is intended to refer to the fact that if someone wishes to do something to make money, that they have the freedom to pursue that opportunity without impediments. However, what is ignored is the fact that there are inherent costs in everything as well as restrictions put in place for the well being of society. There are reasons that paint is no longer sold with lead, companies are no longer able to dump whatever leftover toxic materials from production into the water supply and why cars are required to meet safety guidelines. This term is bandied about way too often by Republicans and Libertarians when describing their ideal economy without understanding the basics ideas behind the theory. And yes it is a theory because it’s virtually impossible to prove a macroeconomic concept.

I think these are two biggest and most annoying misconceptions about a free-market economy.

First, if Republicans wanted to express their ideology more correctly, they would say “a freer market economy.” The alteration of the one word makes a huge difference. Understanding that we live in a market economy means accepting that restrictions and regulations on business will need to be put in place. There is nothing wrong with wanting less restrictions when they make sense, but reacting as if America would be put on the path to Socialism (read: Communism) each time any sort of new regulation suggested shows true ignorance. It is the prices of goods and services which are determined by the basics of supply and demand. If more people want something of limited supply, they will invariably pay more to get that something. Conversely if there is too much of something, people will be able to look to many places and bargain one seller against another to get the best price. That is the basis of a market economy. It all sounds so simple, and on the person-to-person level it really is, but in a true macroeconomic sense, it really isn’t.

Second, it is often made to sound as if one is against a free-market economy, then you are against freedom, and therefore must hate America. I wish that was an exaggeration, but to cite Dennis Prager:

“The answer is that the American left hates the America that believes in American exceptionalism, is prepared to use force to fight what it deems as dangerous evil, affirms the Judeo-Christian value system, believes in the death penalty, supports male-female marriage, rejects big government, wants lower taxes, prefers free market to governmental solutions, etc. The American left, like the rest of the world’s left, loathes that America.”

It is a nice little trick Prager pulls to create two different America’s, all while stating that one America is better than the other. Sure, that is one voice, but one that has a syndicated radio program. He also had an issue with Minnesota Congressman Keith Ellison about using a Koran during his swearing in ceremony. The irony of course is in the US Constitution there no stated religious text that is required to be used when swearing in a representative of the government. The lesson here is: Freedom in the economy? Great. Freedom of religion? Not so much. Also, only the second choice is actually guaranteed by the US Constitution.

There are many, many, many more points that could be made about the fallacy of a “free-market economy,” but recently a situation arose that is relatable. Congress was nearing the end of it’s session and Republicans were threatening to stall every other bill until the “Bush” tax cuts, which were scheduled to expire at the end of 2010, were extended. Democrats were pushing to let only the tax cuts for the wealthiest expire, while the rest were extended. Cries from the right erupted that doing so was an affront to the free market, which again doesn’t actually exist, and that it was class warfare against those who worked hard to earn those large incomes. These same people ignored the fact there is decrease in the inheritance tax, which is really only applicable to those with a large amount of wealth to pass on to their heirs who did nothing to earn that wealth except be born into the right family. You would also hear people say that if these tax cuts were allowed to expire, that capital that would be used to create jobs would disappear and cause the unemployment rate to go higher. There are so many things wrong with that statement, it will need to be left for another day to fully examine.

Wondering about my opinion? I think that the congress was right to extend all of the tax cuts temporarily. So, even though I would consider myself a liberal, I am in favor of something that Republicans were willing to essentially shut down congress unless it was passed? Yes. Even though I absolutely believe that tax rates are too low, especially for the highest income brackets and that any sort of trickle-down economic theory is a complete joke, there is something to be said about not reducing the amount of money in all of the people’s pockets, and how much they were expecting to be putting in their pockets when it is unknown if the global economy is actually recovering.

There was also a key word in that previous statement. Temporarily. There were Republicans who wished to make these tax cuts permanent, but when they knew they didn’t have the votes, they didn’t put up much of a fight. That, in itself shows that for many this is mainly a political trumpet to toot and be heard. So, this issue will be revisited in two years. We know what the make-up of this next congress will be, but we don’t yet know how it will behave in two years. We don’t know how much power, if any, President Obama will be able to exert during an election year, or even if he will still be president the following year, in 2013. If the economy begins to show real progress and unemployment drops, I think a more reasonable debate will be able to be conducted.

Republicans threatened and some might say that Democrats folded, but there are couple of points with which I would like to conclude. After this bill passed, Don’t Ask, Don’t Tell was repealed, the nuclear treaty with Russia was approved, and the bill for 9/11 responders were approved as well. Would these have happened without this compromise? Also, by demanding that the tax cuts for the richest Americans continue, Republicans have ignored all of their rhetoric that was spewed about the national debt and fiscal responsibility and that it needed to be addressed immediately, for the sake of the children. This bill will increase the debt by almost a trillion dollars, and apparently those on the right were A-OK with that. They pleased their constituents (read: large campaign contributors), but many will now have to hope that their vote isn’t mentioned the next time they criticize a spending bill only because it is not fully paid for by cutting spending on something else. Republicans will also have to admit to themselves that they helped President Obama end the year with three large political victories.

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About Chris

I'm that guy from that place.
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15 Responses to Nothing is free in this market.

  1. Clarence says:

    Chris:

    I don’t totally disagree with all y our arguments in this post -though I will say the post seemed to morph from a criticism of the simple case of market economics to a happy summation of all the “accomplishments” of the Obama administration of late. But I’m going to mention a few complicating factors here, possibly for you to be prepared for should you see them in the future.

    First: Right now, economics is not a science. This is because it can’t make testable and repeatable predictions about the vast majority of phenomena that people and countries deal with concerning money. At it’s heart, economics is about the psychology of human trading and no one…NO ONE..fully understands human psychology on either a group or individual level yet.

    Two : There’s quite a huge misunderstanding among those on the left that there might be different conditions for different sized businesses. Normally, businesses are divided among the small, the medium, and the large , and while the definitions will vary somewhat as to number of employees, gross revenue, etc one basic thing about them is this: their scopes of operation tend to vary a lot.

    Small business: Tend to be physically located only in one to three locations within a single state. Have little or no out of state presence , and if they do, it tends to be web-based. If there are any government contracts, said contract tends to be the single most important reason for the companies survival or failure. In short, limited or no government contact/political clout, limited or no out of state or out of country presence. If they have ANY economic clout (which is synonymous with political clout in our country) it’s usually limited to a town or city level government. Many have no economic clout at all.

    Medium sized business: Tend to be headquarted and mostly located within a single state, though they may be one of the larger employers in that state. Tend to have multiple government contracts and contacts at both the state and federal levels. Once again, limited or no nationwide/worldwide presence. Insofar as they employ a lot of people , they sometimes have statewide political clout.

    Large business: “There be multi-nationals here!”, to modify a phrase from Moby Dick. These are the ones (esp. the ones who are multi-national) who run our economic policies, usually most of our foreign policies, and buy off most of our politicians.

    Now why bring this up? Because many people who aren’t into business don’t understand that these three types of businesses tend to have different relationships to the free market. To a small business, and to a lesser extent a medium sized one, the free market is real and tangible. Something a manager or owner can often directly come into contact with via a personal chat with the customers of the business. The rule of the jungle often applies, because these businesses get few, if any government perks and hardly any protection. They don’t often get (esp. at the Federal level) government tax breaks and regulations written just for them. Thus, ironically these smaller businesses tend to pay out more of their profits to the government in terms of taxes and for less real benefit. Big businesses on the other hand, get to have special tax breaks, lots of lobbyists, sometimes foreign policy written esp. for them, the ability to play off states and even nations against each other, and etc. and etc. Different rules apply. Also, in most large corporations the original founders are either dead, retired, or were brought out long ago and the company is run by a Board of Directors with the help (sometimes) of a CEO. Thus institutional memory of humble origins, how hard the struggle was , etc. are missing.

    Is it any wonder that people who are used to the economic world of the small and medium sized business often see the world (based on their experiences) and economy in ways different from both left wingers and those who run large corporations?

    My last comment will be to remember the difference between someone who still needs to earn money for a living -even if its at the 200 to 500 thousand dollar level – and someone who lives comfortably or lavishly off investment income or interest only. Someone who still has to work -esp. if such high salary isn’t guaranteed or will be for a strictly limited period of time – isn’t rich, though they may rightly be called very successful. I suppose its possible that in some cases those people can be over-taxed already , because states, counties and cities often have differing taxes, whatever you think of the current federal rates and exemptions. Ironically, because lots of these people are lumped in with the “rich” (many of the really rich don’t pay anything at all, though to be fair some of them contribute a lot to charity or buy TONS of stuff on the market), a lot of conservatives make the case that the rich pay so many taxes in this country, but its a far different legal and tax environment for Warren Buffet, versus your average successful (but not wealthy) lawyer.

    • Friendly Butt says:

      Clarence, I have been reading this blog and the comments for a while, so I have seen the entirety of your feedback from the beginning to it’s current state. In that time I have witnessed you ignoring the thesis of a given post in order to hijack or derail said post to your own satisfaction by bringing up an (often woefully subjective/unresearched) side point that does not contribute to the overall dialog. More often that not you seem to desire a dominant position over the author of a post or comment rather than furthering the dialog or responding directly to what the author has actually said.

      It’s not that your contributions to conversations here are problematic… that’s the ethos of this blog, but try to understand that one major goal of this blog is to further egaletarian thought and promote equality. This is not the place to abuse those you perceive to be ignorant, nor a playground for your personal vindication.

    • Clarence says:

      What an absolutely brilliant bit of trolling!

      Well played, Sir or Madam, well-played.

    • Friendly Butt says:

      On the contrary, Clarence, this is imnotme.

    • Clarence says:

      Well, I’m glad you revealed yourself, but I considered you a troll before, and I consider you a troll now.

      You’d be hard pressed to find any thread where, for instance, April was talking about feminine hygiene products and I posted a huge amount of unsourced text about the smurfs. My posts always have something to do with the topic at hand, even if they are just to nitpick one or two items.

      I’d ask you to source your assertions, as Danny has done, but I know trolls never do. So until you can substantiate what you are saying, I think I shall feel free to ignore you.

    • April says:

      Break it up, you two!

      imnotme/Friendly Butt isn’t a “troll.” In modern blogosphere-speak, a “troll” is:

      In Internet slang, a troll is someone who posts inflammatory, extraneous, or off-topic messages in an online community, such as an online discussion forum, chat room, or blog, with the primary intent of provoking other users into a desired emotional response or of otherwise disrupting normal on-topic discussion. In addition to the offending poster, the noun troll can also refer to the provocative message itself, as in “that was an excellent troll you posted”. While the term troll and its associated action trolling are primarily associated with Internet discourse, media attention in recent years has made such labels highly subjective, with trolling being used to describe intentionally provocative actions outside of an online context. For example, recent media accounts have used the term troll to describe “a person who defaces internet tribute sites with the aim of causing grief to families.”

  2. JutGory says:

    I, too, found this post confusing, as it morphed from economics to politics. I did not see the connection.
    I have two points, though.
    You say the tax cuts should be extended temporarily. Why only temporarily? A big question conservatives ask is: how high should taxes be? Being in Minnesota, you know we pay 7.75% (?) in sales tax; our income tax goes from 5%-8% (?); the federal income tax goes from 10%-31%; property taxes vary; then there are user fees, gas taxes, cigarette taxes, tanning booth taxes, the estate tax (which is currently on hiatus). Liberals should be up front and honest in saying X% is the most anyone should have to pay in taxes (when all things are considered); on the other hand, conservatives should be up front and honest in saying X% is the minimum that each person should be expected to pay to the government. If they both could do that, then we could have an intelligible discussion about tax policy, because we would be arguing about raising and lowering taxes between the two extremes.

    As for B.O.’s accomplishments, a lot of people are very uneasy about what is going on with this lame-duck session. A lot of the people passing these things will not be around come this time next month. Some of the “spewing” about fiscal responsibility came from people who have not taken office yet, and who are not responsible for what is going on right now.
    -Jut

    • Friendly Butt says:

      “Liberals should be up front and honest in saying X% is the most anyone should have to pay in taxes (when all things are considered); on the other hand, conservatives should be up front and honest in saying X% is the minimum that each person should be expected to pay to the government. If they both could do that, then we could have an intelligible discussion about tax policy, because we would be arguing about raising and lowering taxes between the two extremes.”

      I really like this insight. I think you, Jutgory, should call in on the Ed Shultz show on AM950 and reiterate that for the listeners. Seriously. It’s more than likely the comment will be topical since all the show ever focuses on is the fact that both sides warring is counterproductive/hurts us all. Do it.

  3. catullus says:

    Hey, what do you know, Dennis Prager came up with a fairly accurate description of the US left. I’ve been with that left for nearly four decades. We do cast aspersions on American exceptionalism. We do see through the lies buttressing the use of US force. We do sneer at Judeo-Christians claims of a monopoly on common morality. We do think the death penalty is meted out too questionably and too often. We do think it’s anachronistic chutzpah to limit marriage—a joke in any event—to heterosexuals. We do think neo-liberal economics have become a rationale for cannibalism. We do loathe Prager’s America, but it’s not really personal; we think the nation-state is something to get past anyway. And like Prager, we don’t always like liberals, either.

  4. Chris says:

    I must say that the beginning and end of this post was the most challenging. One of the points I was attempting to make is that something like economics has turned into a political discussion. So, when discussing what is best for the United States economy, opinions are often based on political ideology instead of logical calculations.

    Also, I was not exactly trying to tout President Obama’s successes, especially since all three passed with bi-partisan support. The main point was the fact that preserve tax breaks, specifically for a certain portion of Americans, they were willing to hold up other legislation.

    There are two or three separate blog entries to address some the points made in these comments and perhaps I will find the inspiration to do so in the future.

    But, thank you for the constructive criticism.

    • Friendly Butt says:

      “One of the points I was attempting to make is that something like economics has turned into a political discussion.”

      I got that right away. I enjoyed reading this post; although I agree with some of the criticism that this could be refined our re-outlined to something more cohesive, I also thought that your overall arc of logic was stimulating, and more importantly, egalitarian in its aim. I hope to see more contributions by you in the future.

      One other thing, which made me enjoy this post as I did, is that I find it’s rare or very rare that one would find a commentary relating meta-economics to meta-politics in such a focused context. Kudos.

  5. PrettyAmiable says:

    One of the biggest issues in talking about economics is that people draw lines in the sand where there aren’t any. Perhaps this isn’t seen in the modern radical left, but many (if not most) democrats believe in “free markets.” One primary reason this is true is because you completely made up an implication for free markets that’s not accepted by economists or business theorists. The “free market” refers to being free from governmental regulation, not being free to pursue a given path without any impediments, as you suggest. This is only meant to contrast with command economies, where supply and demand is dictated by the government. These economies fail horribly. It seems like you’re running to the extreme with the government regulation theme and suggesting things like environmental or safety regulations necessarily contradict the notion of being free from governmental regulation, but that’s not what “free markets” means at all. It just means we are free to trade with other countries, and that the government will only step in to keep competition going (i.e. to break up monopolies, which allows for inefficiencies and corruption and is what tends to happen when these enterprises are state-owned). All governments, to some extent, have quotas and subsidies, the ability to engage in trade embargoes as accepted by the WTO, and so on, but the point is the distinction from command economies where business is micromanaged by people who have no business micromanaging.

    You segue from your semantics concern to this point: “Second, it is often made to sound as if one is against a free-market economy, then you are against freedom, and therefore must hate America.” — This obviously depends on who you’re talking to. I don’t think you’re against freedom, but I can guarantee that you don’t have a better solution up your sleeve than deregulated markets. Macroeconomics isn’t a science, as you pointed out, but I’m having trouble naming one economy that brought down its barriers to trade that hasn’t had a significant increase in the standard of living for its people.

    • Chris says:

      There may be some confusion in terms. I was careful to use free-market economy as opposed to free markets. Also, free trade is different than free markets and that is also not what politicians are normally referring to in when discussing these policies. As a rule, Democrats believe in a market economy system, which would be a capitalistic model with necessary rules, regulations, and taxation.

      Also, there was a reason that I used the word “often” in that sentence. Could I have used “sometimes” or “in a few cases?” Sure, but that again depends on the frequency associated with the term “often.”

      My main line of thinking when writing this post is the use of concrete phrases many politicians to describe theoretical concepts. For example, your saying that deregulated markets markets is the best solution, is tough to accept after looking at fall-out from the lack of regulation in the banking industry, which played a large role in the economic crisis.

      Perhaps with clearer writing on my part, there would have been a better opportunity to debate the true meaning of my posts.

    • April says:

      It seems like you’re running to the extreme with the government regulation theme and suggesting things like environmental or safety regulations necessarily contradict the notion of being free from governmental regulation, but that’s not what “free markets” means at all

      Well, that’s the way that Republicans are currently treating it. As if the very existence of an environmental regulation is infringing on their God-given right to be as greedy as they can possibly manage, without regard to the planet or any single other person on it.

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