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What Is THE MARKET?

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May 09, 2009 – Comments (7)

“The market” is just shorthand for the totality of economic interactions of freely acting individuals. - Robert Murphy, Chaos Theory; Two Essays on Market Anarchy (pdf), p. 25

If we are to understand how the market works, why economic policies fail, and why the market acts in an apparently irrational fashion, we must grasp the definition of market activity.  Market activity, as described above, does not come about by government decree.  It comes from within a society, where the collective participatants work to achieve individual goals.  The Society, therefore, is a Means, not an End.  (Mises, Socialism, p. 256).  In a cooperative society, individuals that wish to succeed must depend on the success of others, thus in order to achieve an individual's highest material ends, he must not in any way prevent others from achieving theirs.  This mutual cooperation is the interaction of free individuals.  Because Society is the Means, no one - politician nor activist - can claim that "The Market" fails to achieve certain desired ends for Society, such as equality.  Society has no Ends.  The social cooperation of human beings is only a Means.

Therefore, once we start down the road of centralized economic planning, whether it is fiscal planning by the Federal Reserve, bailouts for failing businesses and banks, and a host of other well-intentioned but ill-conceived policies that spring forth from the minds of politicians, bureaucrats, and reformers, "The Market" is either distorted or ceases to exist entirely.  It is no longer a collection of freely acting individuals, but a collection of coerced individuals.

Within such a setting it is a predictable consequence that a set of individuals will arise that will look to the center of power to help them achieve their ends, rather than cooperating with other individuals in "The Market."  A name once coined for such people is Political Entrepreneurs. It is a predictable consequence because the center of power, The State, has already shown that such an avenue leads to profit and power.  The State, in other words, has licensed theft and coercion among the population.  Indeed, if we look to history we find that everywhere and anywhere a Monopoly or Cartel has existed it has done so with the assistance and support, either directly or indirectly, of The State.

This is the policy of Destruction.  The Market is the mechanism of Creation.  The choice between competing policies of destruction, on the Left and the Right, is still choosing to destroy. 

May we all choose Creation.

David in Qatar

7 Comments – Post Your Own

#1) On May 09, 2009 at 11:01 PM, whereaminow (< 20) wrote:

This passage, which Turgot wrote as a summary of the thought of Vincent de Gournay (who popularized the phrase "laissez faire, laissez passer"), makes it abundantly clear:

"The general freedom of buying and selling is therefore the only means of assuring, on the one hand, the seller of a price sufficient to encourage production, and on the other hand, the consumer, of the best merchandise at the lowest price. This is not to say that in particular instances we may not find a cheating merchant and a duped consumer; but the cheated consumer will learn by experience and will cease to frequent the cheating merchant, who will fall into discredit and thus will be punished for his fraudulence; and this will never happen very often, because generally men will be enlightened upon their evident self-interest.

To expect the government to prevent such fraud from ever occurring would be like wanting it to provide cushions for all the children who might fall. To assume it to be possible to prevent successfully, by regulation, all possible malpractices of this kind, is to sacrifice to a chimerical perfection the whole progress of industry; it is to restrict the imagination of artificers to the narrow limits of the familiar; it is to forbid them all new experiments; it is to renounce even the hope of competing with the foreigners in the making of the new products which they invent daily, since, as they do not conform to our regulations, our workmen cannot imitate these articles without first having obtained permission from the government, that is to say, often after the foreign factories, having profited by the first eagerness of the consumer for this novelty, have already replaced it with something else. It means forgetting that the execution of these regulations is always entrusted to men who may have all the more interest in fraud or in conniving at fraud since the fraud which they might commit would be covered in some way by the seal of public authority and by the confidence which this seal inspires, in the consumers. It is also to forget that these regulations, these inspectors, these offices for inspection and marking, always involve expenses, and that these expenses are always a tax on the merchandise, and as a result overcharge the domestic consumer and discourage the foreign buyer. Thus, with obvious injustice, commerce, and consequently the nation, are charged with a heavy burden to save a few idle people the trouble of instructing themselves or of making enquiries to avoid being cheated. To suppose all consumers to be dupes, and all merchants and manufacturers to be cheats, has the effect of authorizing them to be so, and of degrading all the working members of the community."

– Turgot, "Éloge de Gournay" (1759), translated by P.D. Groenewegen

Simple and honest with great relevance over 300 years later.

Although admittedly no match for Mood Economics :)

David in Qatar

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#2) On May 11, 2009 at 7:45 AM, LawfordCap (99.84) wrote:

David thank you for your comments you make me think a lot about the issues you raise...

Do you think that increases in human and capital flows across borders foster competition between governmental models? With the result being that political parties compete more vigorously in the democratic process by selecting governmental models from the global pool of current and historical governmental models that best raise limited voting capital?

Then when we put this in the context of the collective dike and levy type issues we face at the apartment block, city, country and global levels…. the “business plan selection problem” can partly be seen as a product of the use of overly restrictive boundary conditions...it makes sense for certain modes of collective representation....but does not have the ability to frame the full human condition in relation the case for collective governance?

 

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#3) On May 11, 2009 at 1:01 PM, whereaminow (< 20) wrote:

Do you think that increases in human and capital flows across borders foster competition between governmental models?

I suppose that depends on how the government reacts and the policies it has.  I think that there is always a scarcity of labor, whether the unemployment rate is 0% or 50%, but there is a misallocation of labor skills.  Certain markets, like ours for example, need different skills.  But if you go back 200 years, we had a market that could absorb lower skilled labor.  Nowadays, I see an American market that lacks the businesses that could absorb low skilled labor. 

So if you have a government that encourages market growth as a general policy (not to be confused with an inflation/debt fueled market) I think it can foster competition between government models.  I think Ron Paul is right to say that we win more success in foreign policy by being responsible and trading with others, rather than by bombing them into submission.  Our successes becomes the envy of others and they mimic it.  But if our success is built on a foundation of debt and inflation, then others will mimic that too (see European Union) with dangerous consequences.

With the result being that political parties compete more vigorously in the democratic process by selecting governmental models from the global pool of current and historical governmental models that best raise limited voting capital?

I'm not sure what you mean by voting capital. If you mean money to buy votes, government has proven that resource to be unlimited.  But in terms of getting people to vote for the right issues and be motivated about the right causes, well I believe that the intellectual class of the last 100 years is largely responsible for shaping those views, and have largely been a failure in that respect.  Times, though, they are a changin'. To large degree, the Internet is taking power away from the Intellectual class. Remains to be seen how far that goes or whether the effect is positive or negative, but I think the widest dissemination of information possible is bound to be a positive.

Then when we put this in the context of the collective dike and levy type issues we face at the apartment block, city, country and global levels…. the “business plan selection problem” can partly be seen as a product of the use of overly restrictive boundary conditions...it makes sense for certain modes of collective representation....but does not have the ability to frame the full human condition in relation the case for collective governance? 

Collective governance can be achieved in many different ways, but the argument Robert Murphy lays out in the text above, the role should be based upon contracts, not upon force.  My interpretation of the argument follows the "Meeting of the Mind" argument against shrinkwrap, fine print, clickwrap, etc..  Since there was no "Meeting of the Mind," (the user doesn't and can't be expected to read every fine print agreement in his lifetime), a contract is void if the fine print includes "unexpected terms" (like, hey you just agreed to give me half your estate.. haha!)

I think collective government through force violates the Meeting of the Mind principle by instituting hundreds and thousands of policies (1,100 page long bills for example) that we can't possibly be expected to follow and read every detail of all of them.  So when a bill is enacted that clearly contains "unexpected terms" (they pretty much all do nowadays), they can't be considered enforceable.

David in Qatar

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#4) On May 11, 2009 at 1:50 PM, LawfordCap (99.84) wrote:

"voting capital"...i just mean that parties compete for a limited resource our votes. And the process helps select for better business plan selection methods.

I am a big fan of simplicity, I don’t like fiat currencies and I think open free markets are great...

I just feel there are a limited number of dike/levy issues that we face at the species level where we only get one chance

I take your point that it should be contractual in your relationship to a collective…I have thought about this myself….I have had the following vague thoughts

But how do you think of a contract when you consider that children are just born into a particular collective ….they are free to partake of its benefits, security, health, schooling, museums, national parks….but you can’t get a child to sign a contract in relation to what was invested in them…and you have to allow them the freedom to live in a different collective when they reach an economically productive age? Would you say they should pay off the full debit that the collective incurred to bring them to an economically productive capacity?

I have no solution; I was just wondering how you view a contract?

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#5) On May 12, 2009 at 2:54 AM, whereaminow (< 20) wrote:

But how do you think of a contract when you consider that children are just born into a particular collective ….they are free to partake of its benefits, security, health, schooling, museums, national parks….but you can’t get a child to sign a contract in relation to what was invested in them…and you have to allow them the freedom to live in a different collective when they reach an economically productive age? Would you say they should pay off the full debit that the collective incurred to bring them to an economically productive capacity?

Tough questions. I'm not sure why a collective must incur a debt to bring them to an economically productive capacity. Obviously our education system operates at a loss, but I think that goes back to the "something for nothing" principle, which invariably gives you "nothing for something."  The people in the system think their kids are getting a free education, but instead they are indirectly paying for an education that has practically zero value (see the literacy rate of D.C. high school students.) 

I've read some arguments that say that children should be allowed the right to run away from home at early ages, that adoption markets should be created that allow children to be placed in homes in an auction style rather than a bureaucratic method, etc.. Like you, in this regard, I don't feel comfortable with any of the the ideas proposed.

Rothbard attempted to tackle these questions in The Ethics of Liberty (pdf) and the relationship of children to contracts (see Chapter 14.)  I find myself unconvinved with his argument, but interested in following up. The first solution is usually not a solution, but if it opens up new ways of thinking it may lead to a real solution.

David in Qatar

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#6) On May 12, 2009 at 3:12 AM, automaticaev (36.02) wrote:

the market is where you buy the stocks you know will go up and then you sell it before market closes because the price can change too much overnight.  A retarded monkey could do it.

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#7) On May 12, 2009 at 10:16 AM, LawfordCap (99.84) wrote:

Thank you for the link it was very interesting I read all of chapter 14. I am thinking it through....it would be good to have your thoughts or other links that relate to this:

in relation to the debit incurred to bring a child to a productive age I loosely have in mind the situation where a mother wolf raise her pups out of not only her own but also community energies.

Or wow plants invest limited energies in seed banks...a cost in the present to help guarantee continued existence of the species...or in an even looser way the species right to persist costs the individuals because it exacts investment in the costs of reproduction... the cost of raising helpless young so the species does not go extinct.

For me ethics is not absolute....it is only a socially determined construct that has been found in an evolutionary process to support the persistence in time of a certain collective. This cultural structure uses the minds of individuals to persist… and individuals perceive its existence in their ethical codes the codes that shape individual to individual interactions and are the basis of many of our laws.

 ...the cultural structure that persists in a community tide to a particular environment/geographic location determines the child / parent / community relational ethics at a particular time.

in some communities children are not considered to even belong to the parent they are a community responsibility...in others that are considered  the responsibility of the extended family.

The problem that arises in modern society is that once children were considered an asset because they could pull their own weight in the field … the economically productive age was lower/the return on investment was lower…

However, in our highly complex specialized community that allows us to live as ”individuals“ with the convenience of individually identifiable energy stores (bank accounts), and individually accessible resource stores (supermarkets)…the return on investment in a child, and the ability to link it to the investor/parent/community is diminishing… hence lower birthrates and the situation in Australia where the community (Australian elected government) is actually paying mothers to have babies...and pays them to help facilitate child support. The policy is popular in Australia because it is seen in the context of immigration issues and an “aging population” a fall in birth rates.

 

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