There's No Such Thing as a Free Market, Part 2

It's all arbitrary...

[Before I get started, I wanted to note that Kevin Corcoran has a nice pair of essays over at EconLog in response to my piece on the Moral Parity Thesis. I encourage you to check them out.]

In my last post, I started to look at an argument against libertarianism that’s popular among academics. The argument claims that a free market is a bad political ideal, not because it’s undesirable or unjust, but simply because it’s impossible. There’s no such thing as a free market, and so it doesn’t make any sense to hold that we should pursue that ideal as a goal.

As I noted, this argument takes a couple different forms. The first, which I examined last time, holds that there’s no such thing as a free market because all markets are backed up by coercion, and hence unfree.

The argument I want to consider in this post takes almost the opposite approach. This second version of the argument holds that there’s no such thing as a free market because there are actually lots of things that could count as a free market. So a “free market” is not a single, identifiable ideal, and therefore does not provide us with useful guidance on what we ought to change if we want to move in its direction.

For instance, the economist Ha-Joon Chang, in his book 23 Things They Don’t Tell You About Capitalism, argues that “there is no objective way to define how free a market is.” Whether a given rules counts as an interference with the market or as part of the market depends simply, he claims, on whether we reject or endorse the moral values behind it.

Here’s an example. Suppose the federal government places restrictions on the emission of carbon dioxide above a certain level. Is this a restriction on the free market? Well, if you think that the government has no business restricting CO2, then you’re likely to see it that way. If, on the other hand, you see this kind of CO2 emission as a violation of the rights of others, then you’ll view the regulation as simply part of the legal infrastructure of a free market - just like other laws protecting property rights, upholding contracts, and so on.

Here’s a trickier one. Suppose that a river runs through a piece of land you own. Should the law prevent you from erecting a dam in the river, and thereby restricting the flow of water on to your neighbor’s land? For most libertarians, the answer will depend on whether you think that erecting the dam would infringe in some way upon the rights of your neighbor. If it would, then the law prohibiting such activity is simply upholding property rights. It’s part of the market. If not, then the law is government overreach, and hence interference with the market.

So what should we make of this? Like the first version of the argument, this second version reflects an important truth. But ultimately, I think, it doesn’t do the work its proponents want it to do.

The truth in the argument is that there’s a kind of open-endedness involved in the definition of a free market. Cases like the two I gave above can be multiplied indefinitely, and it seems silly to suppose that they can be resolved by locking yourself in your study, scratching your chin, and deducing answers from the logic of self-ownership. Even if you came out of your study and looked at the empirical world around you, it seems silly to suppose that there is some unique right answer waiting for you to discover. There are a variety of morally acceptable ways in which societies might deal with issues of riparian rights, easements, rules regarding lost or abandoned property, and so forth. Reason alone cannot determine a single right approach.

But it’s one thing to say that there’s some open-endedness in the concept of a free market. It’s quite another thing to say that it’s all open-ended. And this is where Chang (and Nagel and Murphy, in their book on property rights) go wrong.

Suppose you thought, along with Locke, that unowned resources could be legitimately appropriated by mixing your labor with them. As is well known, that principle leaves a lot of questions unanswered. What does it mean to mix one’s labor? Does mixing your labor with land give you rights to water or minerals below the land? The airspace above it?

One way of sidestepping the philosophical puzzles involved in these questions is to simply stipulate an answer through the establishment of a convention. The Homestead Act of 1862, for instance, stated that families could claim up to 160 acres of land once they’d lived on it for five years. Why 160 and not 180? Why five years and not three? Obviously it’s not because those numbers are uniquely mandated by the correct theory of natural rights.

Does that make the theory of natural rights worthless? Of course not. A theory of natural rights establishes general principles, and those principles demarcate a range of morally acceptable solutions to the problem of appropriation. Within that range, societies are free to choose. But the open-endedness is not unlimited. It doesn’t really matter if you specify that families can claim 160 acres or 180. It matters a lot that you specify that they can’t take land that somebody else is already living on.

So what does all of this mean? It’s true that there is no one, unique set of rules and institutions that costs as a “free market.” Neither natural law nor economic theory can tell us exactly what a libertarian utopia should look like. But that doesn’t mean that anything goes. It might be impossible to specify in a non-arbitrary way exactly where blueish-green shades into greenish-blue, or when a child becomes an adult, or when a free-market ceases to become free. But only someone who has allowed philosophical puzzles to blind them to the world in front of them would conclude from this that there’s no difference between green and blue, or a child or an adult, or capitalism and socialism.