Why is an unregulated free-market impossible?

[Flying Purple People Eater]

Not sure if this should be in learning or not, but I wonder about the economic reasoning behind why the concept of a 'free market' spouted by libertarians is not only harmful, but downright impossible.

As someone who does not have time to start teaching themselves basic economics due to urgent activities that must be carried out, could anyone break this down plain and simple? The history behind it, etc.?

[Zulu]

Not sure if this should be in learning or not, but I wonder about the economic reasoning behind why the concept of a 'free market' spouted by libertarians is not only harmful, but downright impossible.

As someone who does not have time to start teaching themselves basic economics due to urgent activities that must be carried out, could anyone break this down plain and simple? The history behind it, etc.?

Because private entrepreneurs begin creating their own private outfits of, literally, regulators. Ever heard of the War in the Lincoln county (http://en.wikipedia.org/wiki/Lincoln_County_War)?

(This is also the reason why anarchy is impossible.)

[Art Vandelay]

Because private entrepreneurs begin creating their own private outfits of, literally, regulators. Ever heard of the War in the Lincoln county (http://en.wikipedia.org/wiki/Lincoln_County_War)?

(This is also the reason why anarchy is impossible.)

Not to drag this off topic, but if anarchy is impossible then so is communism; they are literally the same thing, a stateless, classless society of free producers.

[Ethics Gradient, Traitor For All Ages]

The market would collapse without state intervention in times of crisis, which the market creates by it's nature.

[TheOneWhoKnocks]

The market would collapse without state intervention in times of crisis, which the market creates by it's nature.
This. Also, a state is necessary to facilitate and enforce the "rules of the game" -- stable currency, private property rights, contract agreements, and so forth. The state is not simply reducible to capital, but capital wouldn't be able to circulate and grow without a state.

[Zulu]

if anarchy is impossible then so is communism; they are literally the same thing, a stateless, classless society of free producers.

Penguins can't fly
Cats can't fly
Therefore, cats and penguins, quote, "are literally the same thing".


Also,

http://img252.imageshack.us/img252/7752/anarcyisjustlibertarian.jpg

So,

Anarchy = communism
Anarchy = libertarianism
Therefore,
LIBERTARIANISM = COMMUNISM !!!

:confused::confused::confused:

[Zulu]

capital wouldn't be able to circulate and grow without a state.

Capital would simply create state, if only in the form of the "last man standing" in the market competition becoming some sort of king and imposing his will on everybody else.

[Art Vandelay]

Penguins can't fly
Cats can't fly
Therefore, cats and penguins, quote, "are literally the same thing".


Also,

http://img252.imageshack.us/img252/7752/anarcyisjustlibertarian.jpg

So,

Anarchy = communism
Anarchy = libertarianism
Therefore,
LIBERTARIANISM = COMMUNISM !!!

:confused::confused::confused:

Just no.

[TheOneWhoKnocks]

Capital would simply create state, if only in the form of the "last man standing" in the market competition becoming some sort of king and imposing his will on everybody else.
I really don't see how that could happen. No single firm has the resources or capacity to perform the duties of a state in a developed country. Also, the state has to be relatively unbiased in principle toward individual capitals. Its considerations are for capital as a whole. Now, of course there are times in history when the state does take the side of individual capitals, but that is considered quite unacceptable in bourgeois political thought.

[GiantMonkeyMan]

Anarchy = communism
Anarchy = libertarianism
Therefore,
LIBERTARIANISM = COMMUNISM !!!

:confused::confused::confused:
Your understanding is flawed. Anarchism and Communism have the same final goals in mind; a society of free producers not bound by the chains of money and class. The difference is in the methods utilised to attain this society.

Libertarianism was initially a word synonymous to anarchism but has over time developed a dual meaning in America (and perhaps some of the rest of the English speaking world to a lesser extent). This other meaning has become a term used to describe essentially those supporting the classical liberalism of the pre-depression era where huge monopoly corporations exploited millions out of an oppressed working class by virtue of the laissez-faire economy propped up by a state composed of the same owners of those corporations.

Right-wing libertarians don't seem to realise that 'free' market capitalism depends on the state. Without a state upholding the laws of property and finance, companies couldn't survive competition. Or, more importantly, the only way they could prevent a labour movement would be to enforce the laws as they understand them using their private capital; ie hiring paramilitaries to break strikes, mercenary police and courts to ensure thieves are prosecuted, establishing private armies to uphold contracts between rival businesses etc. Basically Somalia without the religious fundamentalist undertones.

[Tim Cornelis]

Zulu has made it apparent on several occasions he does not advocate a classless, stateless society. I recall him saying hierarchy will aways exist (human nature after all!), and that he equate communism with a centrally planned economy. So no, he does not advocate communism.

[#FF0000]

"malthusian leninist"

[Pelarys]

*snip*

Damn the corruption of the meaning of libertarianism, as a non american/anglo-saxon it's highly confusing. Strangely even after understanding my mistakes this statement makes no damn sense.

[Jimmie Higgins]

Not sure if this should be in learning or not, but I wonder about the economic reasoning behind why the concept of a 'free market' spouted by libertarians is not only harmful, but downright impossible.

As someone who does not have time to start teaching themselves basic economics due to urgent activities that must be carried out, could anyone break this down plain and simple? The history behind it, etc.?

Folks have mostly covered the reasons why even under capitalism's own logic, a truly unregulated market wouldn't work: capitalist states are nearly an expression or tool for capitalist class rule. For this reason capitalist governments are often flexible in their form despite usually claiming that these states are based around immutable principles like equality or justice or democracy. In war and crisis these principle can be seen as hollow as they are often thrown out the window: democracy and free press are suspended during wars; in the economic crisis of the 70s, the "great society" ideals were tossed aside; in the current crisis the "free marketeers" suddenly forgot that "government is the problem" and redisributed tons of wealth to the financial sector. So despite any rhetoric favored at a given time, the only real principle of capitalist governments is to ensure the continuation of the system as a whole... Sometimes this means social democracy to attempt to coopt movements, other times repression, other times parlements and other times Franco or Pinnochett.

As to why these ideas have been promoted and arged for: after the crisis in the 1970s the capitalists had two needs, they had to recover profits and they needed to undo the existing social contract of reforms and working with union leaders in exchange for social peace (since the capitalists no longer had expanding profits or social peace from this arrangement). Incorporating some libertarian freemarket ideology allowed sections of the political and Econ elite to create a social rationale and even social base for the project of eliminating legal and social reforms and attacking economic benefits and control of working conditions. Rather than say, "we need to get rid of some reforms and protections to speed up jobs while eliminating some of the workforce" they could argue that deregulation and privatization are more efficient. They could appeal to small business people and well-off workers by talking about government red tape and taxes and develop a popular base for a pro big business agenda.

[Sinister Cultural Marxist]

Here are three important reasons:

(1) You always need some kind of authority to define property relations and legitimate ownership. This is going to require regulation. The authority of the state is able to do this, and define and regulate property in such a way as to enable exchange and fairly arbitrate things like contracts and whatnot.

(2) Violence is a necessary part of any hierarchical economy to protect one's property. A central authority is needed to manage that violence in favor of property owners. Instead of allowing violence to become the main mode in which economic interests relate to one another (like paying protection money or having the mob go after competitors/unions/businesses which renege on contracts), the state will provide regulations as a sort of neutral basis for economic interactions and monopolize the right to violence.

(3) Property owners have interests which cannot be expressed through free exchange alone, such as the prices of goods which they need to use or the impacts of negative externalities.

This is why market economies without or with only limited government tend to be incredibly violent and mercurial. Look at Somalia and America's "Wild West" for examples. Also look up Hobbes's theories of statecraft for a rationalization of why that is the case. After a while, people who own property are going to look to create a central authority to manage affairs - again we see that with the attempt to create a transitional government in Somalia and the push to create state governments in frontier America. The state and regulations allow for businesses to have some neutral arbiter that allows them to pursue their interests without needing to resort to force, and without the threat of other private interests arbitrarily disrupting their own enterprises.

In other words, many of the same reasons why we have a state are also why there are regulations on the market. It's important to think of regulation in the broadest terms possible, because it shows why even the most libertarian capitalist would ultimately need to fall back on even some minimal form of regulation to protect their enterprise.

[skitty]

[QUOTE=Choler;2564486]Not sure if this should be in learning or not, but I wonder about the economic reasoning behind why the concept of a 'free market' spouted by libertarians is not only harmful, but downright impossible.

If I remember Adam Smith, as soon as you mix market and humans they do everything they can to rig the system to favor themselves. In practice, no free market.

[Let's Get Free]

Because it would be so unstable and unpredictable, even the capitalists wouldn't want it. You see, the capitalists don't really want a "free market." They want a free market when it comes to lifting restrictions on what they want to do, regulated capitalism when it will help them crush competitors in the marketplace, and state capitalism to bail them out when they make reckless gambles on Wall Street and lose.

[cyu]

You always need some kind of authority to define property relations and legitimate ownership.

Yes, this is the precise reason why the pro-capitalist claim of a "free market" isn't free at all. Every property claim restricts the freedom of others to use those resources. Thus the concept of property is the exact opposite of freedom. Pro-capitalists are merely attempting to co-opt the word "freedom" for their own propaganda purposes - after all, who doesn't like "freedom"? But the pro-capitalist word of "free markets" is actually full of restrictions preventing poor people from using resources to survive, and giving exclusive control of vast amounts of resources to the wealthy - the exact opposite of freedom.



why the concept of a 'free market' spouted by libertarians is not only harmful, but downright impossible.



The pro-capitalist "free market" is also used as a code word for wealth inequality. But let's just call it for what it is. When they want wealth inequality, let's call it wealth inequality, and not disguise it with the term "free market".

Here's why wealth inequality doesn't work: every unit of money spent in the market is equivalent to a vote as to what is valuable and what should be produced. This method of resource allocation works only in very primitive models of the market, in which everyone can spend relatively equal amounts of money. Once there are large differences in wealth, the wealthy are able to "out-vote" everyone else. The result is that vast percentages of economic resources are devoted to producing for the wealthy minority, leaving tiny percentages of resources left to produce for the vast majority of the population.

This results in an economy that is ever less able to sustain the general population, and in extreme cases, leads to mass starvation and death.

[Oswy]

Not sure if this should be in learning or not, but I wonder about the economic reasoning behind why the concept of a 'free market' spouted by libertarians is not only harmful, but downright impossible.

As someone who does not have time to start teaching themselves basic economics due to urgent activities that must be carried out, could anyone break this down plain and simple? The history behind it, etc.?

At the most basic level; markets involve competition and competition has winners and losers. Even starting out from an 'idealised' equal power market exchange, market activity will generate differentials in market power - big capital over small, some capital over none. The so-called 'free market' (setting aside the issue of exploitation and alienation for the moment) quickly becomes a market of strong and weak. It's like suggesting that we're all 'free' to come to the gun fights even if we only have a knife, ort a stick, and when some are sitting inside a tank.

[Althusser]

Anarchy is not impossible because it wants to crush capitalism, the market, and the state. Libertarianism and those AnCap fuckheads want to get rid of the state but keep the market and capitalism intact. This is the reason AnCap is impossible, because there needs to be a state to manage the affairs of the whole bourgeoisie in a market system. With no market (Communism, anarchism) there doesn't need to be a state because there's no money or class divide.

[Slavoj Zizek's Balls]

Penguins can't fly
Cats can't fly
Therefore, cats and penguins, quote, "are literally the same thing".


Also,

http://img252.imageshack.us/img252/7752/anarcyisjustlibertarian.jpg

So,

Anarchy = communism
Anarchy = libertarianism
Therefore,
LIBERTARIANISM = COMMUNISM !!!

:confused::confused::confused:

Since when was Anarchy an ideology?

Anyway, why would a free market always result in the existence of monopolies?

[WelcomeToTheParty]

A lot of the political reasons have been covered, but there's a couple of important economic reasons as well. All unregulated markets are plagued by asymmetric information and market externalities and many others run into problems of moral hazard and adverse selection. Thus the pareto efficiency ("state of allocation of resources in which it is impossible to make any one individual better off without making at least one individual worse off.") of markets disappears and they never resemble what is meant when someone is talking about a free market.

Asymmetric information because (taking the assumption of rationality as given) no one has any incentive to release information that would help competitors and yet all free market theories assume perfect and symmetric information. Here we see an example of an individually rational decision that leads to socially irrational outcomes (i.e. it does not maximize social utility). We also saw this in the lead up to the crash in 2008 in the form of business leaders having an incentive to take risky bets (bonuses, shareholder satisfaction, company growth etc.). Of course we know now that those individually rational decisions on aggregate led to a very bad outcome. Another example of this would be the damage caused by pollution. It has a very real cost in many cases, but none of these costs were factored into production decisions because there is no reason an individual producer would. We call these unrecognized social costs externalities and the only practical way to eliminate externalities is through some form of social planning (or unrealistically through perfect individual property rights).

Moral Hazard refers to a situation like someone with car insurance who has less incentive to take care of their car because they aren't going to have to pay for it. The coverage will be priced so as to leave zero expected economic profit for the insurer in a free market so if its customers' policies pay out more than expected it will go out of business. Of course the insurance company could raise prices in response to this, but as those prices rise those who do take car of their cars will eventually find it is rational not to buy insurance. This is called adverse selection and has been a huge problem in health insurance in particular. This will mean the insurer has a smaller pot with which to fund payments and is paying out to larger percentage of its policies. Obviously it will either have to take risky bets with the pot (big externalities!) or it will go out of business, but a free market society cannot properly function without insurance! An obvious contradiction.

Beyond that there is also a lot of work being done in a field called behavioral economics that directly challenges the Homo-Economicus that is assumed in most economic theories. I think intuitively the idea that people are rational utility maximising machines is ridiculous, but now research into that is really taking off. Also free markets are notoriously bad at providing public goods (because of social benefits that are impossible to charge for) so we'll always need way to tax to provide for those.

[WelcomeToTheParty]

Anyway, why would a free market always result in the existence of monopolies?

One reason is economies of scale. Costs fall as production size grows giving large companies power to force smaller ones out of business. Barriers to entry also play a part, there are some productive ventures that require huge amounts of capital up front. This obviously incentives large conglomerates.

[Sudsy]

It's not impossible, it just sucks. Check out Somalia.

[Prof. Oblivion]

It's not impossible, it just sucks. Check out Somalia.

I never understood how Somalia is even relevant to this discussion. Does anyone here know anything about the Somalian economy or is it just ignorantly repeated ad infinitum without any knowledge?

[Sudsy]

I never understood how Somalia is even relevant to this discussion. Does anyone here know anything about the Somalian economy or is it just ignorantly repeated ad infinitum without any knowledge?
Or are we just throwing around ad hominems? Or is this an hominem? My previous comment wasn't constructive but neither was yours, so to avoid a silly internet dispute I'm just gonna shut up about Somalia, but it is relevant.

[Brandon's Impotent Rage]

I pointed out in the 'What Is Libertarianism?" thread that much of AnCap and American Libertarianism has its ideological basis in Austrian 'economics', which is based entirely around the pseudoscience called 'praxeology'.

You know how, in normal economics, you try to use things like empirical testing and mathematical data?

Yeah, the Austrians say 'fuck that commie shit!' and go with a "narrative" approach.

Basically, it's like playing fantasy football with the global economy.

And yes, it IS complete and total bullshit.


....And God help me, but I used to BELIEVE it. :crying:

[Craig_J]

I don#t know if this has been posted but a unregulated free market wouldn't be possible as bsuiness owners make deals on how much to pay workers so that they can maximise profit by exploiting workers. If they didn't make the deals one boss could offer workers higher wages causing the workers to leave to the other one and vice versa untill eventually neither buisness is able to make much profit at all. It makes much more sense for bourgeois business owners to make deals which maximise profit for both of them.

[ÑóẊîöʼn]

You know, I'd say that an "unregulated free market" is not impossible, but rather that it is an extremely unstable state of affairs. Without state regulation, cartels and monopolies are free to form and thus as soon as one gets off the ground, that market is no longer genuinely "free". Or some kind of state will form and that will certainly be the end of the "unregulated free market".

So completely free markets are possible, they just aren't possible for very long.

[Domela Nieuwenhuis]

This is why i think it's impossible:

http://www.revleft.com/vb/blog.php?b=18838

[Die Neue Zeit]

Two words: information asymmetry.

[Prof. Oblivion]

Or are we just throwing around ad hominems? Or is this an hominem? My previous comment wasn't constructive but neither was yours, so to avoid a silly internet dispute I'm just gonna shut up about Somalia, but it is relevant.

Somalia isn't a laissez-faire economy, as is commonly asserted on this forum, and is thus not a representation of a failed libertarian ideology. That was all I was saying.