Like talking to a brick wall.

No matter how many government regulations and interventions I reference, those who want to blame free markets still insist that what they don't like is a product of a free market.

I was just blocked on Quora by someone who insists that America has "The most free market health care system in the world". OK, sure. On a scale of 1 to 10, with 10 being the most free market, America ranks 2.1, while the rest of the world is 2 or lower. Big difference.

Francis Dickinson's answer to the question "Is it really true that European people love socialized medicine in their countries?"

The Free Market's user's manual.

And yet, people keep blaming the free market for problems caused by government intervention. This is starting to get boring.

It shouldn't be hard to understand how to manage a free market. We have the writings of Adam Smith, John Locke, Milton Friedman, F.A. Hayek, Ludwig von Mises, and many more.

Imagine you have a car, and you read the owner's manual. It tells you things like the grade of oil to put in the engine, how many quarts, and how often to change the oil. It tells you what octane gasoline will allow your car to perform at its best. It lists the proper tire pressure, and even has a schedule to bring the car to the dealership for rountine maintenance on things like the coolant system, the brakes, and the spark plugs.

You read the manual carefully, then you pour vegetable oil into the radiator, fill the tank with diesel fuel when it requires 87 octane, and use orange juice as engine oil.

You are surprised that the car doesn't even make it down the driveway?

So why are people blaming the free market, when they replaced real money with paper, turned banking into a cartel with a central bank like the Federal Reserve, subsidized and bailed out corporations that should have been allowed to fail, and imposed a progressive income tax that punishes people who produce more, while paying people not to work throught a welfare state system?

Didn't they read the owner's manual? Didn't they read anything by Adam Smith or Hayek?

The fallacies of Social Contract theory

This is a repost of something I wrote on another forum. 

I've heard the Social Contract Theory used a number of times here as an argument against libertarian or Objectivist arguments for freedom and natural rights, but I've never really directly answered them, basically because there is nothing to answer. I do reject the concept of a social contract, but that is irrelevant. Even if I were to concede that there is a social contract, and that I am willingly bound to it, it changes nothing about the arguments for or against individual freedom.
First of all, we need to understand what social contract means. Here is Wikipedia's description:

The term social contract describes a broad class of philosophical theories whose subject is the implied agreements by which people form nations and maintain social order. In laymen's terms this means that the people give up some rights to a government in order to receive social order. Social contract theory provides the rationale behind the historically important notion that legitimate state authority must be derived from the consent of the governed. The starting point for most of these theories is a heuristic examination of the human condition absent any social order, termed the “state of nature” or “natural state”. In this state of being, an individual’s action is bound only by his or her conscience. From this common starting point, the various proponents of social contract theory attempt to explain, in different ways, why it is in an individual’s rational self-interest to voluntarily subrogate the freedom of action one has under the natural state (their so called “natural rights”) in order to obtain the benefits provided by the formation of social structures.

This all sounds very plausible, especially since we do all enjoy great benefits from living in an ordered society, fairly free of rapists, murderers, and thieves. We also gain the benefit of mutual cooperation, with the economic benefits of a division of labor. All this, and more, is very good reason to live in a community with mutually agreed upon rules of conduct.



But, there are a whole number of problems with this theory, not least of which the idea that the freedom we would have in this mythical or metaphorical "natural state" represents natural rights. As I said, living in an ordered society leaves us for the most part free of rapists, murderers, and thieves. In the "natural state", we would NOT be free of such human predators. Whatever our situation in the natural state, it would not be freedom. By forming societies and governments, we are not giving up freedoms, but securing them. Rape, murder and theft are not rights, but their violation.


This should be enough to disprove social contract theory, but it is not my main point. The fact of the matter is that, even if true, social contract theory would not prove natural rights theory wrong. What it is used for, when arguing against Objectivists and libertarians is to distract them, and to tell them to shut up.



If I were to concede social contract theory as true, I could still argue to amend the terms of the contract. Statists of all kinds, communists, welfare statists, "21st century socialists", as well as fascists and theocrats, all want to make changes in government, in our laws, and even in the accepted moral/ethical theories that the law is based on. Our communities amend the "social contract" all the time by different processes of democratic elections, parliamentary procedure, court presedence, and in America, ammendments to the Constitution. These are all different forms of debate and action taken to change the government. But when you use the social contract theory against someone who is arguing for natural rights, all you are basically saying is "This is the way it is. You already agreed to it as it is, so shut up." You are begging the question, assuming that the specific law in question is right and just because it is the law, and thus part of the social contract. If you yourself want to advocate for social change and new laws, you are being a hypocrite. Why should you be free to advocate change to the government, but not Objectivists or libertarians?



What I have noticed in particular is that the social contract theory, in its most general form, is meaningless, with no description of what form society should take. It could be used to justify any social organization, fascism,  democracy,  monarchy, communism, or even a limited contitutional republic with a laissez-faire capitalist economy, whatever the system of the moment happens to be. Any theory that can explain any fact, actually explains nothing. The only way out of this problem is to presuppose some natural law above the contract, giving it a context and moral purpose. There are reasons why we want to live in an ordered society, namely protection of our right to life. This presupposes natural rights, which is what I have always seen social contract theory used to try to disprove.



Thats why it is both a red herring and question begging. Its a distraction, an attempt to get the natural rights advocate arguing about social contract theory instead of the issue at hand. Instead of discussing the consequences of a progressive income tax, whether redistributive policies are moral, whether or not employment is exploitation, the consequences of protectionist tariffs and whose rights they actually violate, or the morality and practicality of Obamacare, or the nature of property rights, it gets us debating the existence or non-existence of  some mythical contract that nobody has ever seen. And it assumes that you can prove the present social system is moral and voluntary because, supposedly, the natural rights theorist has already agreed to live in a society, and live by its rules. In other words, its just a way to say "Shut up, I don't want to hear what you have to say."

I just joined Liberty Classroom

I'll be posting on my experiences with this educational resource. Of course, I will not be posting content, since it is a pay site, but take these blog posts as a review of the site.

Liberty Classroom

Obama is getting grey

Has anyone else noticed how much grey hair Obama has gotten over the last four years?

2008:

2012:

The office of President of the United States is such a stressful job that nobody in his right mind should seek to fill it. Which is why, I think we always get such lousy candidates for the job.

Short Sellers: The crony capitalist's enemy

There are a lot of ways that opponents of capitalism don't understand how important financial markets are to the way a healthy economy functions. They see people who sit in an office or work on the floor of an exchange as parasites on the system, instead of productive members of society like construction workers or people working on an assembly line. With a construction worker (at least when he isn't leaning on a shovel), it is easy to see the product of his labor, what he is contributing to society. Its not quite so easy to see with a stock broker or financial consultant.

But financial markets are VERY important to a smooth running modern economy. Many economists have explained how speculation helps to coordinate the use of resources and stabilize prices. During a harvest, speculators buy up grain when supplies are abundant and prices would otherwise be low. This provides the farmers with higher prices. But then the speculators save the grain for later in the season, keeping it off the market so it will be available when grain supplies would otherwise be scarce.

It is hardest too see the benefit to the whole economy of having short sellers. I myself have trouble getting around the fact that short sellers are betting on the destruction of value. Emotionally, this, to me, seems creepy, destructive, sneaky, even dishonest. But the more intellectual parts of me have to acknowledge the great good that has been done by short sellers. What they do is reveal the rot in our economy, and speed the healing process.

Take Enron for example:  regulators should have known that something was wrong, but they turned a blind eye. It was speculators who uncovered the corruption, made a big profit selling the company short, and demonstrating to the world that the company was, in fact, an empty shell. The short sellers did not destroy Enron. It was already hollowed out and destroyed. We didn't know it, yet.

What the short sellers did was speed the process by which people came to realize all this.

Without the profits available to short sellers, there is not as much motivation to do the research, take a really good look at a company's books and see if it is really as profitable as people think it is.

The elephant and the blind men

Whenever discussion comes up about the 2008 financial crisis, and I end up asking, again "what free market?", I tend to think of the story of the elephant and the blind men. Everyone knows the story. A group of blind men want to know what an elephant looks like, so they find one, and all of them go to touch it, to feel it and find out what everyone is talking about. One touches the elephant's trunk, and says that an elephant is like a snake. Another is at its ear and says an elephant is like a big banana leaf. A third is at one of its legs and says that an elephant is like a tree trunk. The blind man at the elephant's tail says that it is like a rope, and so on.

A large number of free market observers have each pointed out different aspects of government intervention which helped create the housing bubble and the financial collapse of 2008.

Thomas Sowell, in his book The Housing Boom and Bust, describes land use regulations such as "open space" laws and limits to the height of apartment buildings as the cause of localized high housing prices which government officials all the way up to the White House mistook for a national problem, which they tried to solve with such things as Bill Clinton's "National Homeownership Strategy".

Thomas Woods describes the role of the Austrian Theory of the Business Cycle (ABC) and low interest rated from the Federal Reserve in Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse.

Daniel Henninger explains the role of things like deposit insurance in affecting banks' behavior in regards to risk in Welcome to 'Moral Hazard'.

Others show how deposit insurance was created to fix problems that were caused by previous regulation:

A Perfect Stormof Ignorance

Other observers have implicated the SEC's role in turning our rating agencies into a virtual monopoly, requiring banks to use Moody's, S&S, and Fitch, the three big ones, in order to invest in securities:

A Government Failure, Not a Market Failure

End the Credit Rating Monopoly

There is probably a whole lot more I can list, if I just keep digging. No economist, conservative or free market politician or commentator, or blogger has named all the regulations which helped to contribute to the housing bubble and financial crisis of 2008. To fully understand it, or at least try to, you need to read many different sources, each of which provide a small piece of the whole picture. 

For those who love free markets, the housing bubble and the collapse of 2008 provide a target rich environment for blaming government for its interference in markets.