September 29, 2006
Free Markets Posted by Fredric Smoler at 09:15 AM EST John Steele Gordon wrote that “in the real world, markets can never be totally free. But they should be as free as possible.” To my mild surprise, Josh Zeitz seems to agree with him, writing that “Mr. Gordon’s point—that ‘in the real world, markets can never be totally free. But they should be as free as possible’—may be correct.” I suppose this depends on what “as free as possible” means.
So without knowing what my fellow bloggers mean by that phrase, I shall merely point out that some very good economists do not think that markets should be as free as possible, if that means a return to the least-regulated economic regimes with which we have ever experimented. One of my favorite economists, Jagdish Baghwati, is a pretty militant free-trader. He believes that trade in manufactured goods and agricultural products should be very free indeed, and he is remarkably hostile to what he thinks excessive protection of intellectual property, but he does not believe in unregulated financial flows, that American policy goal of the 1990s, which he thinks can lead to destructive capital flight. Bagwhati was the favorite choice of economists to head the World Trade Organization, which should be some testament to his professional competence.
So what does “as free as possible” mean? For most of history, there were no child-labor laws. I’ve seen some good arguments against very strong child-labor laws in very poor countries, but who believes in the total repeal of child-labor laws in rich countries? There are also some interesting arguments against very strong environmental regulations in very poor countries. Bagwhati has made them, but he does not suggest an equally minimal environmental regulatory environment in rich countries. It would be possible to allow people to work without health and safety regulations. We did that, for most of recorded history, so we know it is possible, but who is for it? There is an old joke alleging that health and safety legislation prevents the market from getting rid of inefficient consumers, but I don’t know too many people who seriously propose that goal. Who is in favor of completely scrapping controls over the free movement of labor, meaning unrestricted immigration? We did that before the 1920s, and did rather well by it, but I cannot think of anyone who claims that we should return to that policy. One still hears the argument for allowing racial discrimination in hiring, but very few people are persuaded by it. So I am genuinely curious: What does “as free as possible” mean to my fellow bloggers?
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