What We Talk About When We Talk About Free Markets


We focus on ideology and The League Of Ordinary Gentlemen

Matt Welch in Reason, commenting on Andrew Sullivan’s support for cash for clunkers:

Ideological shape-shifter and presidential benefit-of-the-doubt-giver Andrew Sullivan types the following words consecutively


I’m nobody’s conservative, but I’m pretty sure if I was telling conservatives how to think I wouldn’t admonish them for failing to champion limited government within two sentences of praising FDR’s pragmatism. It’s like, I dunno, lecturing the Labour Party about demonstrating their pro-union bonafides while praising Margaret Thatcher’s centrism. Sounds a bit off.


Cash-for-clunkers amounts to a rounding error in Tim Geithner’s nose-hair at this point, which is probably why at least some liberals seem so genuinely baffled by the disproportionate criticism it has drawn. But for some of us it’s also a nearly perfect symbol of economic statism run amok. The federal government is taking from the many, giving it to the less-than-many, destroying functional cars, funneling money to an auto industry that it already largely owns (at a hefty taxpayer price tag), then taking multiple (and multiply premature) bows for rescuing the economy and the auto industry in the process.

I understand, and even appreciate, that not everyone interprets things this way. But what I don’t understand, and ultimately don’t respect, is the weird urge to react to yet another Obama administration brainfart by rounding up its opponents and putting them in a metaphorical holding pen marked “ideologically obsessed.” Particularly after eight years in which the only detectable ideology was taxcut-and-spend, and otherwise do what parties in power always do: look for creative new ways to bribe the middle class.

Andrew Sullivan:

One word about Matt Welch’s gripe against my support for the cash-for-clunkers program. He accuses me first of being an “ideological shape-shifter.” But my own understanding of conservatism properly understood is that it is un-ideological, and actually anti-ideological. It has a predisposition to favor individual liberty and limited government and prudent foreign policy, but it is capable of adjusting pragmatically to new times and new problems. Unlike libertarians, conservatives – even those of us on the libertarian edge of conservatism – do believe government has a role beyond minimal protection. I believe in environmental protection, for example, and have done my entire life. I believe in free secondary education and government supported higher education.

I’ve changed on a few issues; while I remain opposed to Roe, I’ve shifted toward accepting abortions in the first trimester; I’ve also shifted against my once unchastened belief in the utility of American military power to advance democracy (I was, however, against intervention in Somalia and Rwanda); and I’ve begun to worry that the last few decades have opened up too big an inequality gap in America for political stability in the long run.

These are shifts, yes. But they are good faith attempts to learn from mistakes and history and adjust to new circumstances.

Scott H. Payne, on Sullivan:

But Andrew seems to chalk his degree of intellectual honesty up to his political stripes by referencing his conception of conservatism “properly understood” as “anti-ideological” and claiming that that understanding has allowed for “good faith attempts to learn from mistakes and history and adjust to new circumstances”. My own read, on the other hand, is that it is Andrew’s integrity as a person that has engendered such a intellectual honesty and openness and that his integrity, for all my griping (I gripe because I love), has persevered in spite of his avowed ideological leanings.

It is not, as Andrew formulates, that his conception of conservative ideology, properly understood, has allowed for “good faith attempts to learn from mistakes and history and adjust to new circumstances”, but rather that his intellectual honesty as a person has forced his avowed ideological affiliation to reckon with those realities.


It’s all fine and well for a majority of Americans to talk about their political beliefs being conservative in theory, but what ideologies like conservatism, liberalism, libertarianism, etc. have demonstrated to us time and time again is that what looks great in theory generally turns out to be much less so in practice. This is in no small part because the realm of theory — which let me be clear, I don’t harbour any animosity towards, I’m a theorizer — tends to be a simplified field considering only the dynamics that will contribute to a neat and clean picture wherein said theory has, as previously railed, “figured it all out”.

But the world of application is, frankly, much more complicated than all that, it requires, as Andrew himself has noted, that one avoid governing “by the book”. And while Andrew might like for his “properly understood conservatism” to deftly avoid this pitfall, what he fails to account for is that the book his conservatism governs by is one of outcomes. It basically says that, if you keep your hands to yourself and let a, b, c happen as they will, then x, y, and z should follow.

greginak in the comments:

That was good stuff from Andrew. It would be interesting for the posters to offer criticisms of their own theories. It is to easy to just bloviate about how your side is correct.

As an openly admitted liberal I would say liberals could learn a bit from libertarian economic arguments about things like regulatory capture. Some liberals are hostile to market’s and the profit motive as a solution to social problems. Many lib’s are to quick to want government solutions to various social problems. L’s could benefit from trying to think about the unintended consequences of their policies. L’s haven’t often wanted to spend the time to sell policies to people who disagree. To many Dem’s are invested in the belief in American Exceptionalism that infects our foreign policy. To many Dem’s have become beholden to the same ginormous bags of corporate money that the R’s are.

Mark Thompson at The League:

In the comments to Scott’s post last week, greginak (who was one of the few to hone in on Scott’s central point) asked for the “posters to offer criticisms of their own theories.”  This seemed like an interesting and worthwhile exercise, so I figured I’d give it a try, with some help from Monty Python.  I should note that for the most part, these critiques are going to be of libertarianism (excluding the pure anarchist variety, to which a lot of these critiques don’t apply) in general rather than my theories that deviate from run-of-the-mill libertarianism (if such a thing exists).


One of the areas where the libertarian critique is strongest is in its warning against the unintended consequences of central planning and regulation.  The trouble is that we don’t do a very good job recognizing that de-regulation can likewise have its share of unintended consequences.  Often these unintended consequences can justifiably be overlooked on the grounds that the people hurt will be the people who were using a regulation for their own competitive advantage and thus are not really victims.  But other times, deregulation can mix with other still-extant regulations and laws to exacerbate the effects of those existing laws, hurting people who have not directly benefited financially from the previous regulation and who may even already be victims of the other regulation and thus see the effects of that other regulation increase even more.   Still other times, deregulation may only serve to strengthen the hand of businesses that already benefit from the protection of another regulation.  A good example of such a situation would be one where regulations severely restrict who can enter a given market while the deregulation gives those already in that market the ability to expand even more without a significantly increased threat of competition.


I think libertarianism still offers the moral vision that I find most appealing, and I think the Hayekian critique of central planning is almost certainly correct.  But libertarianism is an ideology/comprehensive political philosophy.  And just like any other ideology or political philosophy, its adherents are going to be subject to a lot of blind spots when it is confronted with reality.  This doesn’t make libertarianism “wrong” in any sense of the word – if we were starting society from scratch, I can easily imagine any variety of functioning governments that would be consistent with libertarian philosophy.  But we’re not starting society from scratch and instead are dealing with a highly complex and developed world that won’t always be amenable to libertarian ideals.  Libertarians would do well to be cognizant of these imperfections even if they do not think these imperfections warrant a deviation from standard libertarian theory in a given instance.

Pascal-Emmanuel Gobry at The American Scene:

I am a fierce proponent of free markets. Therefore I am a fierce proponent of government intervention in the market.

Or, to put things less inflamatorily, one thing that often bothers me about US defenders of free markets is how easily they (and we) forget that free markets are created, maintained and curated by, well, the government. Free market conservatives often behave as if free markets are like a state of nature in which ham-fisted government arrives after the fact and wrecks everything when, in fact, it is the opposite. In a state of nature, you have permanent war. Traders and entrepreneurs can only exist once you have a Leviathan to enforce things like private property, money and contracts — all things created and maintained by the State. The rules of the market are set by the State. And if the State doesn’t intervene — justly — in the markets, you cannot have a free market.


Free markets require a strong and active government. The US is a “more free market” place than “Europe” (insofar as these broad strokes mean anything), in part because it has a government that is less high about maintaining a free market. There was never any trust busting in France. Among my friends who work in finance in Paris and New York, they scared of the SEC; meanwhile its equivalent the AMF is the butt of jokes.

The reason I write this now is because, as much as I’ve enjoyed Megan’s spirited defense of pharmaceutical and medical innovation — and as much as I agree with her on the merits —, at times she does sound too much as if the pharmaceutical industry as it exists today is an unadulterated free market. In her Bloggingheads with Mark Schmitt, even though I was hootin’ and hollerin’ when she excoriated Schmitt’s attacks on Big Pharma as crypto-socialist, I couldn’t help but take Schmitt’s point that Big Pharma as it currently exists was created and is made possible by the government. Leave alone the FDA approval process — the pharma business is based on patents and copyright, which are government created and enforced institutions if there ever were. When pharma companies pay off generics companies not to bring generics to the market, that is a voluntary transaction between private entities, and yet it is the opposite of a free market. It is, in fact, cartel formation. And it begs for big bad government to come in, perhaps with black helicopters, take people to court and slap big fines.

The question of health care reform vis à vis the healthcare and pharma markets is not whether to leave the market intact or not. It’s how do we structure a market so that the incentives are aligned in a way that serves consumers best.

Just a thought.

And more Gobry in the comments:

First of all — and I should have made this clearer — I am not so much arguing against specific policy positions as I am arguing against a kind of rhetoric.

The main point that I am trying to make is that a- all markets operate under parameters explicitly or implicitly set by the government and b- the question of how free a market is is not about whether the government intervenes but how it intervenes. Government intervention covers a lot more things than what we tend to refer to when speaking about “government intervention.”

The financial sector is often thought of as — so to speak — the “most” free market of free markets. And yet, as many on the right have pointed out, it is also one of the most heavily regulated sectors of the economy. There is no market out there which is not underpinned in one way or another by government regulations.


“Just leave us alone” is a fine idea, and even a fine principle. But as a matter of policy, it is insufficient. I wouldn’t go as far as to say that it’s wrong, but it is insufficient.

I am left wondering what defense you would allow the free market against its detractors. Both these cases, it seems clear to me, result not from wild-west unregulated chaos, but from governments that couldn’t leave well enough alone.

You might be right. I allow this defense to the free market: explaining why this instance of government intervention is bad. The defense I don’t like is: government intervention is bad because it is government intervention.

Mark Thompson:

In comments, Gobry also hits on something that was a bit of an underlying theme in my Monty Python post, writing: “I am not so much arguing against specific policy positions as I am arguing against a kind of rhetoric.”  This is critical – free market advocates, particularly in recent months, have tended to adopt pretty straightforward anarcho-capitalist rhetoric even though precious few of those advocates are actually anarcho-capitalists.

The reason this is such a problematic line of attack is that anarcho-capitalist rhetoric only makes sense if you’re willing to go the Full Monty in favor of anarcho-capitalism.  If you’re not willing to go that far, then you have to be able to argue against a particular government proposal for intervention or in favor of a particular proposed deregulation on terms specific to that proposal.  Simply assuming that what already exists is in some way more of a free market than what would exist if a particular government action were taken too often ignores the way in which the very system one is defending is already dependent on any number of government interventions.  Additionally, simply assuming that the removal of a particular government intervention will in some way create a freer market too often ignores the possibility that said intervention was part of the structure necessary for a freer market.

To be sure, there will often be times – and I would say far more often than not – when a government intervention creates or will create a set of perverse incentives that will do little to solve a given problem or simply solve a small problem while simultaneously creating additional, bigger problems.  But the opposition to that government intervention needs to be able to explain why it believes the particular government intervention will do more harm than good as well as why existing government interventions do more good than harm and should not be radically restructured.

E.D. Kain:

See also Pascal-Emmanuel Gobry on free markets and government intervention.  He makes a lot of very, very good points, though I think it’s always important – should always be at the back of our minds – that there are things seen and things unseen when it comes to the consequences of meddling, well-intentioned or no.  I can’t honestly say that any effort or intervention by the government will be bad.  I say that sometimes but – I shouldn’t.  I think you just have to be careful.  Government is pulled by the strings of the powerful, and where the powerful lead it is not always what we are told.

Kevin Drum:

Right now, it’s arguable that government ground rules give pharmaceutical companies too little incentive to innovate.  If FDA regs forced them to demonstrate more than just superiority to a sugar pill, drug company incentives might be aligned a little more strongly toward finding genuinely effective new therapies instead of yet another statin or ED pill or a slightly different heartburn formulation.

Or maybe not.  It’s an argument worth having.  But the current system is by no means the free market juggernaut conservatives like to pretend it is.  Changing the ground rules might very well increase innovation, not stifle it.


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