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Free Markets

6 min read

Part of Markets and money.

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Every episode (8)

Who argued it

Art Carden · Jeffrey Tucker · Benjamin Powell · Veronique de Rugy · David Boaz · John Allison · Tom G. Palmer · Luigi Zingales

Capitalism · Rent Control · Minimum Wage · COVID-19 · Civil Liberties · Socialism · Economic Freedom · Libertarianism

Background: free market

The price system as the core

Bob Zadek frames the free market as, at bottom, a system of prices. In his introduction to a discussion with economist Art Carden, he calls price “the purest and most ultimate truth if it is the result of a free market,” and describes buying and selling as a vote exercised hundreds of times a day, so that the more pure price information exists, the purer what he calls economic democracy is Art Carden on Price Theory & Its Discontents (2022). The episode’s summary states that Zadek and Carden discuss prices as the most accurate form of information for coordinating human action, and that government interventions such as rent control, minimum wage and price gouging laws distort those signals, producing waste and shortages.

Zadek applies the same frame to labor. In a discussion with Jonathan Tasini, he says there are many circumstances in which goods and services are bought and sold for more than they are worth, defining worth as the price a free market would dictate, and compares legislating above-market pay to a minimum wage. He identifies as one of his beefs with unions that one of their purposes is to see that members are paid more than they are worth The Two Faces of Janus v. AFSCME (2018).

The subsidized market

The clearest concrete case on the show is higher education. Zadek tells guest Arvin Vora that student loan outstanding exceeds about a trillion dollars and is greater than credit card debt, that a bill in Congress would forgive student loans, and that a bill promoted by President Obama and supported by candidate Romney would hold student loans at an artificially low interest rate of 3.4% rather than the statutory 6.8% America’s Student Loan Problem (2012). Vora argues that universal forgiveness would lead colleges to raise rates because the decision makers are not held responsible for the price, and that if there were no student loans at all, colleges would be forced to charge tuitions a normal person could afford. He states that at a private college a student pays roughly $100 an hour for a lecture, with 200 students in the room, so the college receives $20,000 an hour.

Zadek’s gloss is that students go through the gesture of picking a college while treating borrowed money as somebody else’s money, producing a market insensitive to price; he says tuition over the past 10 years has risen at a rate more than 5% above inflation, and Vora says it has been around three times the inflation rate and is rising faster than medical costs. Zadek calls the college student on loans the country’s real free rider.

Property as the foundation

Zadek locates the fault line between socialism and a free market economy in private property. Recalling an earlier hour with John Judis, he says he discovered that a core difference was respect, in his case, or disrespect, in the socialists’ case, for the importance of private property. He states that capitalism depends on vigorous defense of the concept of private property, that it has a moral basis, and that one who acquires property lawfully, without fraud or coercion or force, has the moral right to retain it and exclude others from its use and enjoyment; in a socialist society, he says, private property is not eliminated but its importance is diminished The Foundations of Property (2021). The episode summary describes the guest, Professor Bart J. Wilson, discussing property as a universal human custom that facilitates conflict avoidance, abstract trade and specialization, leading to higher societal wealth through comparative advantage.

The dating parallel

Zadek proposes dating as a way to explain markets to the youngest cohort of voters, who he says favor less free market. He calls dating a very free market in which people exercise judgment with very little compulsion and very little government protection, make wrong choices, suffer for them, and do not cry out for government screening Big government can’t save us from coronavirus (2020). Guest Jeffrey Tucker agrees, saying he was looking at statistics showing 40% of couples now meet through technology and online dating apps, and that government that wanted to plan society would have to start with managing the dating market because that gets to the heart of demographics. He cites China’s one child per family law as an experiment in that direction, and says millennial attitudes reflect confusion born of economic ignorance, with people financially strapped by college debts they should never have undertaken.

Across episodes: the same phrase, two referents

The topic recurs across the episodes without a single line of development. In 2012 Zadek and Vora treat the free market as a real mechanism distorted by subsidies; in 2018 Tasini tells Zadek flatly that there is no such thing as a free market and calls it a marketing phrase used to accomplish ideological goals, while Zadek answers with a “free marketeer” thought experiment about two Walmart stores The Two Faces of Janus v. AFSCME (2018). In 2020 Zadek and Tucker extend the market to dating; in 2021 Zadek grounds it in private property; in 2022 Zadek and Carden return to price. The later episodes do not answer Tasini’s objection; they restate the price-and-property account in new settings.

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