Thursday, October 2, 2008


There Ain't No Such Thing As A Free Market.

Whether or not it's desirable is irrelevant, because it's impossible. All markets are regulated, taxed, and manipulated. That's the nature of markets. After all, a market is a social contract between as much as a government is. People agree to participate in it, and they have expectations about the honesty and fairness of market transactions. When the people perceive that this is no longer the case, the one instrument they have to deal with it is the power of the government.

During the early days of the NYSE, American stock markets were nearly unregulated, but much of the rest of economic activity in the country was regulated. Stock markets do not act in an economic vacuum, and legislation about taxation, land use, wages, and a variety of other socioeconomic issues must be considered when claiming a market is a so-called free one.

And since no one person can have all information about all markets at all times, pro-polity, properly functioning government regulations such as disclosure and labeling, safety standards, and so on are enacted on behalf of the people to ameliorate unfair and dangerous market practices. Fraud, embezzlement, and coercion, for example, should be an illegal act, even though punishing these activities is regulation of potentially viable market practices. Yes, government can easily make bad laws that harm the citizenry, but it is the people's duty to use their voting and First Amendment rights to prevent that.

Simply saying "let the markets decide" -- meaning let the financial markets decide -- ignores the fact that government is a market participator. Businesses, as collectivist entities themselves, hold more power than individual consumers. Ad-hoc consumer groups can augment the role of government in such situations, but our form of government is specifically intended to be the representative of the people. The government is part of the markets, and what the markets have decided through unethical, and perhaps illegal, practices is to provoke the attention of this particular market actor.

So the markets have decided. They've decided to embrace practices which will cause the government to fulfill its role of representing the people by attempting to protect them from economic catastrophe. Whether or not I agree with the plan, and whether or not it accomplishes its goals, the government is performing a natural duty by stepping-in.

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