Unicorns and Free Markets

One of the more depressing features of the discourse on the parlous state of our economy is the constant refrain from some about the need to allow ‘free markets’ to do their magic and fix our ills.

That’s nice.

Or it would be were free markets not like unicorns.

Both are beautiful and captivating. Their features send us into paroxysms of joy and wonder. Their exploits and virtues are the stuff of great poetry or writing. They beguile us with the extent of their magical powers. They haunt us with endless dreams of what might have been.

Were they real.

Which neither are.

It is one thing for poets to wax lyrical about imaginary animals like unicorns in order to inflame our minds at the mythical. It is another for supposedly hard headed analysts to invoke free markets as an elixir of endless youth and vigor for our economy. Free markets are artifacts of our imaginations. They were invented in order that we could study the many differences between their imagined perfection and the grubby mess that is the real world. They allow us to identify all sorts of anomalies and quirks that clutter up real life and prevent it from ever being as pristine as the dream like wonderland we call a free market.

But there never has been, nor will there ever be, a truly free market. Like the unicorn they cannot nor do they exist. They remain a vivid and unfortunate reminder that human imagination and human reality inhabit two very different spheres. Call it a Platonic curse. I cannot abide Plato and his authoritarian views, nor can I stomach his obsession with the unreal. The notion that ‘pure’ forms exist, and that we are fatally compromised and thus shall never experience such purity is utter nonsense. It never existed in the first place, so it is hardly a failure not to experience such nirvana. Nonetheless Plato and his errors have infected our lives for more than two thousand years. Most notably in Christianity which is almost exactly built upon his faulty foundation – not that most Christians seem to notice or care. This is not an idle comparison: the exertions urged upon sinners bear a remarkable likeness to the exertions urged upon the unemployed. Both are deemed failures who should repent and improve themselves in order to be saved. Both are urged to hew more closely to a dogma remote from the front lines of modern living. No wonder Weber got lost in the Puritan work ethic.

And free markets?

They are a version of a Platonic ideal. They are unrealizable in the world of humanity. They turn to vapor and vanish the moment any contact with temporal considerations are introduced. They are a mist that distorts our dialog.

The reason is, of course, that markets in our real world and compromised daily by all sorts of stuff the free market dreamers call flaws. But they are not flaws at all: they are essential constructs and components of non-mythical markets.

The dream like free market is something that is suspended in mid air. It has no contact with geography, with man made institutions, nor with our incomplete cognitive ability – neither our instrumental nor our cognitive constraints limit its computational powers – and its denizens are unrecognizable as human. They are what Miroswski calls cyborgs in his book “Machine Dreams”. Only when real people and all their many imperfections are totally expunged from a free market can it become free. Only when it is released from the constraints of the law, custom, culture, religion, class, gender, and family can it rise above the mess of humanity and become free. And only when it is universal and not locked into a specific earthly location can it be free.

In other words it cannot be.

The analytical mythology that is the free market came into being because economists wanted to set up a laboratory model against which to compare the real world. I am being generous here. In my more cynical moments I would argue that they wanted to justify a certain way of life – they wanted to ‘prove’ that the interference of government was deleterious to the creation of wealth. So the cynic within me would say that the entire edifice of classical economics has been an effort to prove the superiority of decentralized markets over centralized or planned economies. This is not science it is politics. And the upshot has been the creation of an artifact we know as the free market, which, when stripped of all humanity, is indisputably superior in exactly the long sought for manner.

That economists still advocate this artifact as an exemplar of reality is shameful. They know full well that it is an imagined object.

Having opened Pandora’s box they have armed an ideologically motivated group to march off with the concept and impose, or try to impose it, on society. These ideological storm troopers engage in all sorts of social engineering in order to force reality more closely to align itself with the dreamscape. And by so doing they both undermine humanity and they introduce conflicts and distortions into the everyday workings of a real economy.

One outcome of this social engineering is the enormous change in the distribution of wealth we see today. As long as we acknowledge the conflict between democracy, which is a device for ensuring a more equable distribution of power and wealth, and capitalism, which necessarily results in exploitation and concentrations of power and wealth, we can maintain a balance. The conflict between the two enforces compromise. And all compromise leaves purists dissatisfied. The great era of the US economy – the 1950’s and 1960’s – was built upon this messy compromise. Once we allowed ourselves to be beguiled by the free market myth we sacrificed that balance. We unwittingly undermined democracy and favored capitalism.

We started to believe that unicorns were real.

And so, having arrived at the nearest we can to executing the dream here in the real world, after having deregulated and tossed aside as much constraint as we can, we are faced with the ugly moment of truth. Our pursuit of unicorns has been in vain. We are awake from the delusion. Reality requires limits to the market. Because only within limits do real markets exist.

That is the great lesson to be learned from the decades of Reagan illusion: once we strip away humanity in order to explore the magic of the free market, we should not then fall into the trap of thinking we are looking at something real. A market without the trappings of humanity is not a market. It is a unicorn like myth. It simply cannot be. However beautiful. However mysterious. However perfect.

So it saddens me to hear advocates of free markets get any air time in our current discourse on the economy. They are selling ideology not economic advice.

Snake oil has no place in our debate when the livelihoods of over nine million of our fellow citizens are at risk.

The unemployed deserve more than stories about unicorns. They deserve policies to restore growth. Policies based upon real world economics.