Misperception of "Free Market"
So many conflicting claims have been made about "Free" markets that most people aren't even sure what they are. An unfortunate number both pro and con think that "free" means anarchy. Rather than try to clean up the mess created by their demagoguery, I'm going to try to coin a new phrase: "fair" market capitalism.
Competition
Competition comes in different forms. One can compete by advancing one's self or impeding one's competitors (or some combination). One is positive, the other negative. In sports, where the competition is "only a game", either form may be acceptable within broad limits. However, in economics, society benefits from advance and suffers from militance. I like to illustrate this distinction with the sports analogy...
Racing vs Fighting
Picture two Olympic events: a foot race having clearly marked lanes, and a boxing match. Runners strive exclusively to maximize their own performances, but boxers divert some of their energy into weakening each other.
In a race, all competitors can move forward simultaneously, and all can move at their maximum ability. Even if one "loses" the competition, one has still moved forward and may yet cross the finish line (earn a profit). With clearly marked lanes, violations can be penalized.
On the other hand, in a fight, one competitor's advance or gain is at the expense of another, and often both suffer. Such dog-eat-dog warfare is the zero- or negative-sum view that static-thinking leftists claim of all capitalist activity. Hence popular confusion about the goodness or badness of economic competition.
Outlaw Fighting
When competition is allowed to stray into sabotage, extortion, fraud, espionage, government corruption etc., it is a an evil to be condemned by all. An enlightened government attaches a high cost to destructive ways of "getting ahead". Competition (i.e. "greed") is then channeled into creativity, production, invention and discovery, becoming a powerful good that is celebrated by fair-market capitalists. Our policy goal should be to minimize the evil without precluding the good.
Encourage Racing
Although race officials will penalize lane violations, they do not become involved in micromanaging the runners. They certainly don't hold back the swift to allow the slow to keep up. As long as every runner is free to move forward, nobody should be aggrieved if some move forward more than others.
Similarly, while an enlightened government stands ready and strong to penalize militance in business, it should not stifle individual creativity and invention by attempting to centrally plan an entire economy. Nor should it destroy productivity and incentive by penalizing success.
Finally, those companies that can't even cross the finish line (turn a profit) must be allowed to retire (liquidate). As I say in Evil Corporations, a business is an abstract entity, so its death is a mere reorganization. Liquidation frees resources to be used by others. Government harms society when it buys waste and freezes resources by subsidizing failure.
Conclusion
For society to avoid the negatives caused by misguided greed yet gain the positives from properly channeled market networks, we must see different forms of competition clearly enough to allow unencumbered races while penalizing militance. Then, maybe, our markets can be fair and our society free.
Copyright 2003-2008 by Jeffry R. Fisher: Permission is granted to reproduce this article in whole, but only in combination with attribution, the original title, the original URL, and this copyright notice.