Markets Are About More Than Money

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Markets Are About More Than Money

By: Pete Geddes
Posted on December 24, 2003 FREE Insights Topics:

I recently had the pleasure of talking with two senior high school government classes. We explored the use of language and the nuances beyond words such as “conservative” and “progressive.” I urged them to think in terms of causal relationships, not the slogans so common in today’s political discourse. Here’s an example.

Critics of markets believe they’re disruptive, chaotic, and unpredictable. They fret that the market’s powerful forces are beyond anyone’s control and produce results that benefit a few at the expense of many. In this view, markets can’t be trusted to fairly allocate wealth and power. The political process must do so. Hence, a key role of the state is to buffer, direct, or end the unfair nature of markets.

Market forces are indeed powerful. Markets evolve through trial and error, experimentation and feedback. Their constant search for fitness subjects ideas (both new and old) to ruthless and unsentimental testing. This often painfully rearranges existing social structures.

Virginia Postrel noted in her book, The Future and Its Enemies, “The most important challenge to markets today is...the ideology of stasis, the notion that the good society is one of stability, predictability, and control.” This desire to control the dynamic nature of markets is a profoundly conservative position. Yet the advocates of control describe themselves as “progressives,” not conservatives.

Hence, we find Green Party presidential candidate Ralph Nader siding with populist paleo-conservative Pat Buchanan. Both oppose free trade, technological innovation, and the expansion of some industries and the contraction of others. They see every manifestation of competitive, dynamic markets leading us to an impoverished future. They agree that government should constrain change and progress.

But the stasism they seek carries a very high price. As an example, let’s explore the opposition to “Big Box” stores. When a Wal-Mart, Costco, or Home Depot comes to town, some fear for the little guys on Main Street. They decry the homogenization of America and perhaps worry that their town’s character and sense of community are being eroded.

These are reasonable fears. But at their root is a strong opposition to change. Stasists are bound to be frustrated because markets, like ecosystems, are organic. Change is their natural state. And it usually occurs faster in social than in ecological systems.

Economics professor Russ Roberts understands that the money consumers save at Wal-Mart, though important, is not the main benefit. In his blog invisibleheart.com he explains how Home Depot and Wal-Mart have saved people a lot of money. The money they once spent on higher-priced goods is now used to support all kinds of things we can only imagine (e.g., sending kids to college, giving them music lessons, or funding a charity). The money they save flows into millions of other places. This fosters new businesses and nonprofits. This is possible because retailing has become more efficient and hence cheaper.

Local shops survive by catering to niche markets. For example, I frequent our local hardware store, in the same location on Main Street for over 100 years. They know their customers by name and provide unmatched service. But some local businesses won’t survive this competition. Who’s to blame? No one is forced to shop at Home Depot and Barnes & Noble. These stores thrive only because they offer consumers quality goods at low prices.

And here’s a key point. By making decisions they thought best, millions of individuals have made these stores successful. Decisions will be made. But by whom? “Progressives” who oppose or try to ban these stores are attempting to impose their preferences over the choices of millions of other individuals. Is this fair?

This sort of protectionism is a hyper-conservative position. And as we’ve learned from the recent experience with steel tariffs, trying to help one group comes at the expense of another. In the case of Big Box stores, it’s low-income folks who get hurt.

Here’s my take-home message to the students: The market is about much more than cheap stereos. The market’s most important attribute is its ability to spontaneously organize complex societies without coercion. And when transactions are voluntary, they’re peaceful. This encourages cooperation and civility among disparate people. Surely these are values worth celebrating during the holiday season.

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