The Standing Invitation

Posts Tagged ‘Markets

None Of The Above

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There are two kinds of freedom: negative freedom, the freedom from oppression; and positive freedom, the freedom to achieve one’s potential.*

A caveman wandering alone is, in the negative sense, as free as he could possibly be. But although nobody is around to tell him what to do, this does not mean he is able to do anything. He is not free to fly faster than the speed of sound in an aeroplane. He is not free to listen to an orchestra. He is not free to look at distant galaxies through a telescope. And if he falls and breaks his leg, he is free only to starve to death in agony.

To do these things he will have to cooperate with others, and this means losing the right to act however he likes. He accepts a certain amount of control over his life by others, in order to do things he would not otherwise be able to do. Having a life expectancy greater than twenty-five is probably worth not being able to butcher any other caveman you meet.

This is why humans formed societies: to allow them to achieve things in groups that they could not do alone. Not all these personal positive-freedom dreams are equally attainable; nor are they mutually compatible. It is the role of government to facilitate the achievement of our potential, whether this is our potential to learn to read, our potential to survive a treatable illness regardless of our economic background, or our potential to investigate the inner workings of the universe.

I am not saying that we should prostrate ourselves at the mercy of our superiors and allow them to grant us wishes. The freedom to declare oneself one’s own boss and say hang the consequences is valuable even for its own sake. But acknowledging that we are surrendering some freedoms to achieve others allows us to think of what we should reasonably expect for what we have traded in – and what inequalities in society we should think of as failures of that society.

Of course this social-contract model of society is just a fiction, a convenient way of justifying why there needs to be a government. But in fact none of us was ever asked. We are born into our societies; which one we end up in is largely dependent on where our mother’s uterus happens to be at the time, which is hardly the best way of making any important decision. And while migration does allow us some market freedom, this increasingly owned planet is offering us fewer and fewer chances of ticking the box marked ‘none of the above’.

When governments don’t give us value for money ­– positive freedom for negative freedom, opportunity for rules – we can’t take our custom elsewhere. We have to demand some changes.

 

* See Isaiah Berlin. The words negative and positive do not correspond here with bad and good; they’re just names.

Written by The S I

July 24, 2011 at 9:05 pm

Corrosive — Apply With Caution

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In a recent post I said I thought markets are ‘corrosive’. I would like to be explicit about exactly what I mean by this.

In his excellent book The Undercover Economist, Tim Harford calls a perfect market “the World of Truth”, in which free competition always allows the price of a thing to be what people are willing to pay for it. It is impossible for a commodity to be overvalued, because competitors who are willing to sell it for less will do so, driving prices down as a result.

There are many reasons why perfect markets cannot exist in the real world – cartels, for example, or information asymmetry. Nevertheless, they are often seen as ideals to aspire to. They provide easy, non-coercive ways in which the creativity of thousands of people can be harnessed to solve problems. There are even people ­– scary anarcho-capitalist Walter Block is one – who would go as far as to say they can solve all problems.

His solution to sexual harassment in the workplace, for example, is not to inflict a moral code on people and tell them that sexual harassment in wrong. Rather, your wages should reflect the amount of sexual harassment you are willing to receive. If you are unhappy with being harassed a lot at £20,000 a year, you should quit and find a job with less harassment, or keep the level of harassment and ask for a raise. Acting in this way subjects harassing bosses to market forces; and if bosses find it hard to employ people at the wages they are willing to offer, maybe they ought to tone down the amount of harassment. In this way, a free market can arrive at a solution that is optimal for everyone involved, without an authoritarian moral code imposed on us someone who claims to know better.

Implicit in this is the theory that markets are morally neutral. Markets do not make judgements of right and wrong; they deal only in prices. Unfortunately, things are not so simple.

A study of childcare centres is revealing. Late pickups of children from childcare centres is a major inconvenience for the carers, requiring them to stay after work at a cost to themselves. Many centres decided to impose a fine on parents who were late. The cost was meant to disincentivise lateness through the power of markets.

The result was the exact opposite: late pickups increased. Why? Because parents stopped being ashamed of lateness. They saw the money they paid, not as a fine, but as daycare.

If there is no sense of shame to accompany it, fining people for littering has the power to turn beautiful scenery into expensive rubbish dumps. And fining construction companies for on-site deaths has the power to let the companies decide how many lives they can reasonably afford to lose.

Markets are not neutral. The decision to commoditise something is a moral judgement. And sometimes it is the wrong one to make.

REFERENCES

http://mises.org/journals/lf/1975/1975_09.pdf

http://www.nytimes.com/2005/05/15/books/chapters/0515-1st-levitt.html

http://downloads.bbc.co.uk/rmhttp/radio4/transcripts/20090609_reith.pdf

Written by The S I

July 16, 2011 at 9:58 pm

A Degree in What?

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In recent years in this country there has been a proliferation in the number and variety of courses taught in universities. Many of my parents’ generation have been disquieted by this. Do we really need to have people with degrees in plumbing? Furniture making? Golf course management?

It’s an interesting question. Specialising in any subject requires study, but what is it that makes one specialism suitable for teaching in a university, and one not? What is it that makes a degree in English, psychology or physics seem reasonable, but a degree in motor maintenance seem unnecessary?

My own pet theory derives from a belief that universities and schools are institutions designed, intentionally or not, to protect the young from capitalism.

Some subjects do seem more suited to university study than others. What does this suitability correlate with? Is it perceived usefulness to society? Hardly. The differences in figures for employment in the first six months of graduating between English literature students and physicists tells us that these subjects are valued very differently by society, even though anybody could tell you that the place to get at good each of these subjects is in a university. A skilled plumber can command a much better salary than an English graduate, but few people seem to think that plumbing is something to study in university.

I also don’t believe suitability correlates with knowledge of one’s discipline. Does someone who spends three years studying English or physics know more than someone who spent the same time studying motor mechanics? I can’t believe it necessarily follows. I’m not even sure the question makes sense. I wouldn’t ask a hairdresser to calibrate a particle accelerator; but then, I wouldn’t ask a physicist to cut my hair, either.

The crucial difference, I think, is this: that a bad furniture maker can just about get away with making bad furniture, for less, and in so doing learn how to make good furniture, for more; but a bad physicist, or a bad specialist in mediaeval Dutch, is of no use to anyone. It is a question of apprenticeship, growth, and survival in a hostile world.

Capitalism is corrosive, and markets, though necessary and important, are dangerous places for the inexperienced to play. We do not throw children out onto the street to fend for themselves in the name of free markets. We protect them, educate them, to give them the skills they will need to make themselves useful. At eighteen, people leave school wanting to pursue different careers. In some of these careers, it is possible to start with nothing and learn the job on the go; in others, a few years’ more training is needed before the person is ready to start. Universities – all education, in fact – should be a safe haven where the young are able to develop the skills they need to contribute to society in future, without feeling the tidal forces of markets. It worries me that this may not continue to be the case.

Written by The S I

July 12, 2011 at 8:38 pm

Posted in Politics

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