Professor Bart Laws of Brown University – Refuting His Comment Bombs

In pursuing this article on Think Progress that talks about Ron Paul’s stance on ending central economic planning, I noticed this comment in the comments section by Professor Bart Laws, who is an Asst Professor of Health Services Policy & Practice for Brown University.

Professor Laws states:

Well sure. But the supply of money isn’t the only essential basis for a market economy that can only be supplied by government. To begin with, every transaction has externalities — this is not just an unusual event (typically represented as “market failure”) — it’s absolutely pervasive. Every time you drive to the store, you pollute the air. When they built the store, they changed the character of the neighborhood. And buy the way, you couldn’t have driven to the store without a road, and the store wouldn’t be where it was if not for the layout of roads. There are always information asymmetries, that’s why the food has labeling requirements. There are always monopolies and conspiracies against free trade, that have to be regulated. Contracts must be enforced, i.e. the government has to make sure the food is what it claims to be, and that the store pays the wholesaler, and that your money is not counterfeit.

And on and on and on. The “free market” is a myth, which has never existed and never could exist. All markets are regulated and deeply controlled by public policy. The only question is how they are regulated, and on whose behalf. Economics as it is ordinarily taught, and as it is understood by libertarians, is utter nonsense, from beginning to end.

I found this statement to be so filled with logical fallacies, economic errors, and outright propaganda that I felt compelled to do a full refutation of this nonsense in an entirely separate article.

So lets break down this statement piece by piece.

Professor Laws writes:

Well sure. But the supply of money isn’t the only essential basis for a market economy that can only be supplied by government.

Claiming that the supply of money in a free market requires the State to create and manage it ignores the entirety of human history.  Clearly money arises from barter, where people generally accept the most saleable good as a common currency.  Actors in a free market of goods and services have a clear need for a currency in order to facilitate the division of labor and to facilitate trade transactions; thus, actors in private markets will naturally select commodities to act as currencies on their own without any State intervention or violence.

In other words, coercion is not necessary in order for people to accept something the markets have deemed to have value as a “money.”   If people can see value something, they will trade goods and services for it voluntarily.  In early American history, tobacco was commonly traded as a currency, as were beaver pelts and Spanish doubloons.  No coercion was necessary by the State in order for people to accept those commodities as currencies in trade.

Karl Menger explains how gold came to be money:

Under such circumstances it became the leading idea in the minds of the more intelligent bargainers,and then, as the situation came to be more generally understood, in the mind of every one, that the stock of goods destined to be exchanged for other goods must in the first instance be laid out in precious metals, or must be converted into them, or had already supplied his wants in that direction. But in and by this function, the precious metals are already constituted generally current media of exchange. In other words, they hereby function as commodities for which every one seeks to exchange his market-goods, not, as a rule, in order to consumption but entirely because of their special saleableness, in the intention of exchanging them subsequently for other goods directly profitable to him. No accident, nor the consequence of state compulsion, nor voluntary convention of traders effected this. It was the just apprehending of their individual self-interest which brought it to pass, that all the more economically advanced nations accepted the precious metals as money as soon as a sufficient supply of them had been collected and introduced into commerce. The advance from less to more costly money-stuffs depends upon analogous causes.

Laws’ comment continues:

To begin with, every transaction has externalities — this is not just an unusual event (typically represented as “market failure”) — it’s absolutely pervasive. Every time you drive to the store, you pollute the air. When they built the store, they changed the character of the neighborhood. And buy the way, you couldn’t have driven to the store without a road, and the store wouldn’t be where it was if not for the layout of roads. There are always information asymmetries, that’s why the food has labeling requirements.

As if the free market simply has no way to deal with these externalities.

I’m not sure how building a store constitutes a bad thing in this professor’s mind, but lets look at pollution.   In a free market, every parcel of property would be owned by a private individual or entity.  Given that private property owners have a clear right to take action against others who damage their property, it should become clear that the reason why we have so much pollution today is because government PREVENTS private property owners from seeking compensation against others who pollute their property.

A prime example of this would be the recent BP oil spill.  In this case, the government placed arbitrary limits on the damages individuals could seek against BP.  Further, the government refused to allow fishermen to own parcels of ocean property.  And because individual fishermen did not have ownership rights over their territorial fishing grounds, they could not sue BP directly for damaging their ocean property.  Economist Walter Block explains why the free market is the best mechanism for reducing pollution.

As a side note, Block also has done extensive work on the privatization of roads.   As it turns out, the first major roads in America were privately owned pay-per-use turnpikes.  These ultimately failed because the State refused to uphold the property rights of the road owners and usurped control of the roads from them.  Historically, we can say with total certainty that the State is not necessary in order for us to have roads and bridges.

Laws continues:

There are always monopolies and conspiracies against free trade, that have to be regulated.

While certainly there are always conspiracies against free trade (given that private businesses absolutely HATE free market competition), the question is what is the best “regulator” of business behavior?  How has the State done so far in regulating private industry?

Has the State bailed out private business who were doomed to bankruptcy with tax payer money?  Has the State helped to drive competition out of the markets by driving up the cost of regulatory compliance?  Has the State artificially limited business competition by forcing people to get permission from the State before they can engage in commerce (business licenses)?  Has the State given monopoly privileges of production to various industries through the patent system?

What would the free market have done to those bankers on Wall Street if the State had not bailed them out?  What would the free market have done to BP had the State not artificially limited the liability of the oil giant?  What would the free market do to those who engage in racism, sexism, or other “isms” that are clearly bad?  Wouldn’t the market deprive those business of profits they would otherwise have if they did not engage in such behaviors?

As for the monopolies claim, natural monopolies can not exist in a truly free market, because if individuals see a means of making a profit within an industry, they will naturally open up a business to compete within that industry.  Professor Thomas DiLorenzo explains why natural monopolies are a myth here.

Laws continues:

Contracts must be enforced, i.e. the government has to make sure the food is what it claims to be, and that the store pays the wholesaler, and that your money is not counterfeit.

Indeed, there must be a way for contracts to be enforced and for property to be protected in order for commerce to flow unimpeded by violent looting.  However, it is clearly oxymoronic to say that violent looting is necessary in order to prevent violent looting.  Clearly if the free market were allowed to operate in all areas of life, voluntarily funded solutions to security and dispute arbitration would arise.  These lectures by Professor Hans Hoppe and Professor Robert Murphy explain how free markets would go about securing private property and settling disputes between market actors.

Laws continues:

And on and on and on. The “free market” is a myth, which has never existed and never could exist. All markets are regulated and deeply controlled by public policy. The only question is how they are regulated, and on whose behalf. Economics as it is ordinarily taught, and as it is understood by libertarians, is utter nonsense, from beginning to end.

To claim the free market is a “myth” is to claim voluntary barter is an impossibility.  Clearly such a claim is utter hogwash.  Consider the case of a small island with 10 inhabitants.  Is it impossible for those 10 inhabitants to engage in productive labor and then trade the things they produce with each other?

If one man on the island specializes in growing corn and another man specializes in raising chickens, is it impossible for them to voluntarily exchange the surplus of the fruits of their labor with each other so that both may enjoy corn and chicken for dinner?

The “free market” is nothing more than people voluntarily trading goods and services they have produced with each other.  Clearly such a situation is not “mythical” or Utopian, it is how normal civilized people behave on a daily basis.

If I ever ended up in a college class being taught by this clown, I’d exercise my “free market” ability to drop the class and get a refund on my tuition payment.  Of course, I’d still have to pay for other people to be educated by this clown because my earnings are taken from me by force and are used to subsidize the banking and college markets against my consent – a fact that I’m sure Professor Laws is quite aware of.

 

 

  • Ruggedrodney

    awesome

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  • http://www.facebook.com/people/William-Stearns/100002147063456 William Stearns

    There is one thing the State is good at, and that is compressing the most un-knowledge into people’s heads as possible, as evidenced by this fine specimen Professor Laws.

  • DKONA

    ‘Contracts must be enforced…’ here comes the government to police tha free market.Integrity would be forced on the market in due time, consumers could use the judicial system if it remains untainted by political interference.