Free Markets and Efficiency Revisited

When slave labor was no longer available, individuals turned to convict leasing. When this was outlawed, individuals looked no further than their own families. The point is that the individual is a small but powerful unit on a micro-scale. One person may not be likely to conquer thousands at once, but he can certainly impose himself upon several others. When this happens, the ability to compete is hampered. The free market is threatened by its own freedoms. Regulations demand that a person's rights only go so far as his neighbor's doorstep. In a truly free competition, individual liberties should not be protected. This restricts individual freedom, after all. But then, once the lines of law are drawn through the economy, what kinds of regulation are sufficient to guarantee a fair competition without any extra regulation? And wouldn't this mean that we've already ceded the free market to a fair market? Isn't "fair" subjective, and therefore, isn't any regulation on the basis of fairness completely arbitrary?

Further, what about economic efficiency? If the pursuit of the largest economic pie were the most important of all pursuits, then what about human rights? Again, the moment a single concession is made to protect human rights and individual liberties, a debate begs itself: in what way is it appropriate to protect individual freedoms at the expense of laissez faire preferences for deregulated economies? After all, what is the operating definition of self-interest? Is it to be restricted to mean only self-interest so long as it does not directly impinge on the ability of another entity to compete? This is the only concession the neoclassical can make without abandoning the entire ship, and it is a wholly academic concession if the Institutionalists are even partly correct. In other words, if institutions really do interact with one another, the regulatory problem becomes larger and larger, because not only do institutions have to be regulated internally, but also in their interactions with other institutions.

As discussed in the section on Institutionalism, economic institutions exert themselves on the individual in interconnected ways. This means that, if there is a problem in one institution, but none inherent in the others, the others may be "infected" by the problem in the one. An example of this interconnectedness was given earlier: if the housing market alone subjects its participants to discrimination, the repercussions are felt in the oppressed individual's education, access to capital, career prospects and access to health care. Furthermore, the impact on the individual's education is felt in her access to capital and career prospects, and by extension health care. Limited career prospects also limit access to adequate health care and capital, the latter of which is required to improve the housing situation. Thus, there is an entrenchment of the housing situation. Finally, poor health care further affects educational and career prospects, because it has been shown (as if it needed to be shown...) that less healthy individuals have a harder time in their careers and education. To correct all of the problems in this cycle, the lending market, for example, would require regulations that cover the lending institution's interest in information such as street address, education level and employment/income. But to what extent should these relationships be regulated?

The last two sections boil down to a small number of principals: 1) efficiency as the primary objective of an economy is indefensible, and based on fallacies such as the free market and pure competition; 2) the free market is almost no one's ideal, including theorists who fall squarely in the free market camp (and in fact gives rise to a "might makes right" world view that leads naturally to enslavement and other forms of inhumane oppression); and 3) determining a truly fair market is nearly impossible. The section to follow will examine the economics of American political structures to see how they relate to the trends seen particularly in the section just completed.



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