We Really Do Want Our Markets To Be As Free As Possible

Theresa ‘The Appeaser’ May began her speech at the Conservative Party conference this week by re-iterating her party’s commitment to free markets. Unfortunately, she went on to announce several policies, such as the price cap on utilities and extra funding for the Help To Buy scheme, which completely undermined that commitment. As Inigo Montoya said, ‘You keep using that word. I do not think it means what you think it means.’

Mrs May is not the only one who doesn’t understand what the free market is. BBC journalists – even the heavy hitters such as John Humphrys and Nick Robinson – regularly use ‘free market’ and ‘capitalism’ interchangeably, as if they were synonyms.

Many people also talk about ‘the market’ as if it were a thing. It isn’t. There’s no such thing as ‘the market’. Or rather, there’s no such thing as ‘the market’. It’s an idea, a concept. It’s a useful bit of short-hand for describing lots of occurrences of something that is very real, namely, trade.

The market also isn’t out there somewhere, something that concerns only politicians and economists and academics and businessmen. To paraphrase Pogo, ‘We have met the market and it is us.’

When you fill up the car or make the weekly grocery shop or pay your mortgage and the utility bills, when you stop for a coffee on the way to work or a pint of milk on the way home because the kids used the last of it for breakfast, you’re part of the market. And you’re not alone. Millions of people in your country, billions of people around the world, are doing exactly what you’re doing: engaging in trade. Think of all those individual transactions and add them up. That’s what ‘the market’ is. ‘The market’ is all of those uncountable number of trades we make every day.

When you buy a ready meal you make a trade. The supermarket that sells you the meal and the company that made the meal and the transport drivers who delivered the meal to the store and the store employees who put the meal on the shelves, they all gain a slice of the money you pay for the meal. And in return you gain not only the  meal but also the time it would have taken you to make the meal yourself. Your time has value.

As long as both sides of the trade are making the trade voluntarily, both sides gain something. And the result of it all is that both sides are now wealthier because both side have traded something they value less for something they value more. Both sides have been enriched. Again, add up all those millions of daily transactions where both sides have got wealthier. That is exactly how countries and societies and, yes, individuals lift themselves out of poverty.

When a group of politicians or bureaucrats regulate markets what they’re really doing is putting restrictions on those uncountable daily individual transactions. And since you are part of the market, it means they are telling you who you may and may not make a trade with. They are telling you what you may and may not make a trade for. When they fiddle about with tax levels and price caps they are fiddling about with your decision about whether a particular trade is worth the cost and effort to you and with the other guy’s decision about whether a particular trade is worth the cost and effort of him of dealing with you.

It’s not just politicians and bureaucrats who want to influence those decisions or even make those decisions for you. There are also all those campaigners for this or that social cause who want to do the same. They don’t have the power to force you to change your decisions, but they do have another pretty powerful weapon: shame. They try to shame you into changing your trading decisions by telling you that if you don’t change them you’re unethical and evil, or by telling you you’re lazy or fat or drink too much. They campaign to shame companies into changing their policies and their procedures and their processes, which changes the companies’ costs, which influences both the companies’ and your decisions about whether a trade is worth the cost and effort.

The market does not exist to provide you with what you need. Even less does it exist to provide you what others decide for you that you need. It exists to provide you with what you want, and as much as you want of it, when you want it.

People who believe in free markets are not pointy-headed policy wonks, nor are they heartless bitter clingers to an outdated theory that only helps big business and hurts the little guy. We genuinely don’t want people to be poor. Many of us have been poor ourselves. We know from experience that being poor is not fun and we really don’t others to have to go through what we have gone through. That is the whole flipping point of it all. We want the market to be as free as possible because we want as many people as possible to get as wealthy as possible as quickly as possible by trading as much as possible.




US DOJ’s SCOTUS Amicus Brief In Gay Wedding Cake Case Is Good For Liberty, Free Markets, And Gays

The US Department of Justice (DOJ) has filed an amicus brief on behalf of Jack Phillips in an upcoming US Supreme Court case, Masterpiece Cakeshop v. Colorado. Media reports describe the brief, not unsurprisingly, as further proof that the Trump administration is hostile toward the LGBT community. In reality, however, the DOJ’s intervention is not only good for liberty and free markets, but also very much in the best interests of the LGBT community.

According to the LA Times the story begins five years ago, when Charlie Craig and David Mullins asked Masterpiece Cakeshop about a cake for their wedding reception. Phillips, the owner of Masterpiece Cakeshop, declined. He said that making cakes for same-sex couples violated his religious principles.

Craig and Mullins filed a complaint with the Colorado Civil Rights Commission. Colorado, like some twenty other states, requires businesses serving the public to offer equal service to all customers, regardless of their sexual orientation. An administrative judge, a state commission, and the Colorado Appellate Court all decided that Phillips had violated Colorado law. As a result, Phillips no longer offers customised wedding cakes.

With the backing of the Alliance Defending Freedom Phillips has appealed to the US Supreme Court, asking to be exempted from the Colorado law under the First Amendment’s protection of free speech. The DOJ’s Acting Solicitor General Jeffrey B. Wall has filed an amicus brief on behalf of Phillips, arguing that Phillips’s rights to free speech and to the free exercise of religion should take precedence over Colorado’s law prohibiting discrimination on the grounds of sexual orientation.

The exemption that Wall calls for in the brief is not all-encomposing. Again according to the LA Times, Walls says that it should apply to only those businesses whose “product or service [is] inherently communicative.” In other words, it would not apply to most businesses. “A commercial banquet hall may not refuse to rent its facilities, nor may a car service refuse to provide limousines,” he says. He also says that the exemption should not include cases of racial discrimination, a distinction that is in line with previous Supreme Court decisions.

The scope of the claimed exemption is, for supporters of free markets, too narrow. For markets to be truly free, transactions must be voluntary on both sides. If a business is forced to provide a service against its principles, regardless of however abhorrent we may find those principles, it is not a voluntary transaction. The transaction is lop-sided.

The customer may, of course, back out of the transaction for any reason. It may be that the price is too high. Or the customer may hear that the baker’s cakes turn out to be not up to the quality promised. Perhaps the customer finds out that the bakery’s health department rating is less than perfect. Or, more to the point, it may be that the customer hears something about the baker that convinces him not to give the baker his money. Whatever the reason, the point is that there is no restriction, apart from contracts, that prevents the customer declining to continue with the trade.

The businessman, on the other hand, is compelled by law to trade with each and every potential customer who comes long. And this point is vitally important: the baker’s cakes don’t magically appear from nowhere. They are not baked by friendly, helpful elves who live in trees. Everything a baker sells is the result of either his own labour or that of his employees.

What the Colorado law amounts to, in the end, is that the baker has no control over his labour. He is compelled by law to provide his labour for anyone who demands it, regardless of his conscience, his principles, or his beliefs. In what way is this just?

If the law requiring a business to deal equally with all customers were removed it would return trade to a level playing field. Both parties would have to be happy with the terms of the transaction for it to proceed. It would, in short, be truly free trade.

As for the interests of the LGBT community, it would seem obvious that forbidding a business from discriminating against some customers simply because of their sexuality is a good thing. And no doubt that is exactly what was intended by the legislators who enacted the anti-discrimination laws.

Those legislators, unfortunately, got it exactly wrong. The law, as it stands, denies gays and lesbians the market’s single most important product: information.

What we call the market is really just the sum of all the individual transactions we all make every day. If you stopped for a coffee on your way to work this morning then you were part of the market. When you go for the weekly shop or fill up with petrol or sign up for Amazon Prime then you are part of the market. All those individual transactions we make every day, when they’re added up, make up the market. And that market gives us information. And information is power. Mind, it’s not just the transactions that do take place; it’s also those that don’t. When a business owner refuses to serve a customer because he’s gay or black or a policeman or in the military, that is information about the business owner. It tells us that the business owner doesn’t like gays or blacks or a policemen or servicemen.

It’s not at all unreasonable for a customer not to want to hand over his money to a businessman who despises him. In fact, it’s quite understandable. That’s why boycotts have been a tool for fighting prejudice since at least 1880, if not longer. Boycotts hit a business owner where it hurts the most: in the bottom line.

But if the bigoted businessman is forced to trade with any and all customers then the market loses that crucial information about who the businessman is and isn’t willing to trade with. The information about the bigoted businessman is lost. And as a result it is impossible to know who deserves to be boycotted and who doesn’t. Even if the the discriminated-against customer refuses ever to trade with a bigoted shopkeeper, he will likely deal with one simply because he has no way of knowing who the bigots are. How can this possibly be in the LGBT community’s best interests?

The DOJ’s brief is a good start, but it doesn’t go nearly far enough.