LETTER TO THE EDITOR:

Free market solves its own problems

Richard McCord, Henderson

Sunday, May 10, 2009 | 2:04 a.m.

Letters I have written defending free markets have appeared in the Las Vegas Sun a number of times. I have said that free markets are man’s greatest innovation and that they have produced wealth never before imagined.

Unprecedented wealth creation has not impressed many of your other letters writers, however. Rather than acknowledge the humanitarianism of the improvement in our aggregate standard of living, they focus on disparities in wealth, equating them to unfairness.

To make economic outcomes fairer and right the market’s wrongs, they support new regulations and laws to rein in greedy businessmen and bankers. The result of these market-hobbling measures, though, will be less wealth and a lower aggregate standard of living. Wealth disparity will be decreased, though at the cost of greater poverty and human suffering.

But the free market affords them an alternative. If greedy businessmen and bankers have been making profits of obscene proportions, then the market has opened an opportunity for less greedy businessmen and bankers to earn less-obscene profits and capture market share. The world will beat a path to their door. Everyone would see the virtue of profits made giving people a better deal.

So start a bank and charge lower interest rates on credit cards. Sell gasoline for less. If you say the laws and regulations make it too difficult to do, then join me in making it easier. But be careful. There are those who will begrudge your new wealth and want to redistribute it in the interest of fairness.

Discussion: 11 comments so far…

By lvsundog

5/10/09 at 4:03 a.m.

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Mr. McCord does not acknowledge that the libertarian fantasy of wealth creation having a humanitarian result, is just that - a fantasy. The fantasy assumes that people are fair and reasonable, and in the ideal world, the fantasy would work.

In theory, there is no difference between theory and practice, but in practice, there are huge differences.

The unprecedented wealth creation which Mr. McCord refers to, has led to unprecedented greed, much to the detriment of the supposed humanitarian results of the so-called free market.

Mr. MCCord says that there are those who begrudge new wealth. Does he not see that the begrudging is for the multimillion dollar rewards for ruining a company and crowing about laying off thousands of workers? Does he not see that the Bernie Madoffs and endless clones, did not earn their wealth through legitimate means, but relied on deception and misplaced trust? Does he not see that it is not a free market when laws are crafted for the sole purpose of making the wealthy, wealthier? Does he not see that the productivity of the American worker has increased boundlessly over the past couple of decades, while the compensation has decreased?

The "free market" rant would be more believable if the plutocratic element were removed. Until that happens, the free market rant rings quite hollow.

There is something else that Mr. McCord does not know. My words are those of someone who was once a Libertarian. With a capital L. Until I discovered that it was mostly fantasy.
By jldour

5/10/09 at 5:40 a.m.

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lvsundog, I agree with you that the greed of most CEO's is obscene. Some of them make so much money they can't possibly spend it all in their lifetime. They all sit on each others boards and vote each other these ridiculous compensation packages. I have worked for a large corporation for over thirty years and it is like a broken record, do more with less. They talk about delivering value to their "shareholders". The shareholders they are really talking about are the corporate officers and board members.
Having said that, I don't know what the answer would be. I do believe in a free market. I also believe that this government is not capable of cleaning up its own greed and corruption let alone that of others. If you take away the entrepreneurial spirit of those willing to take risk for reward you diminish the soul of the country.
There are laws that will take care of the Madoffs of the world. A law that limits a person's salary, as tempting as it is for me to say he** yes, seems to smack of big brother government that I hope we don't become.
By CactusJack

5/10/09 at 6:04 a.m.

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What free-marketers refuse to recognize is there is no such thing as a free market. There are only those who exploit market regulations better than others. A free market would eventually lead to monopolies.

What they also refuse to recognize is that market regulation has been done once effectively to the betterment of all. From 1946 to 1980, we had the highest standard of living in the world with a very progressive tax system. The middle class was the strongest and most successful in history. Until Reaganomics started to undue all the progress made by the New Deal. It led to the Depression 2.0. The proof is there. Market regulation and a strong middle class work.

You cannot get rid of greed. You can only tax it.
By lazyfaire

5/10/09 at 9:54 a.m.

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lvsundog:

"The fantasy assumes that people are fair and reasonable, and in the ideal world, the fantasy would work."

The free market assumes only that people will act out of self-interest. Competition ensures fair and reasonable. That is no fantasy.

"In theory, there is no difference between theory and practice, but in practice, there are huge differences."

There is no theory that says there is no difference between theory and practice. Theories are attempts to explain reality. Practice either proves or disproves them. Your statement sounds intelligent, even clever. It's nonsense.

"The unprecedented wealth creation which Mr. McCord refers to, has led to unprecedented greed..."

Actually, greed can lead to wealth creation, but not the other way around. Competition provides a check on greed. If people like you took advantage of the market's opportunities when greed is creating obscene profits, instead of crying for regualtions on those creating wealth, you could eliminate those obscene profits, reduce greed, and get rich in the process. That would benefit society a thousand times more than restraining the free market, which makes everyone poorer.

"Does he not see..." [all the bad things people do.]

With more regulation or less, people will do bad things. The most controlled economies in the world have been the most corrupt. The free market provides the best check on bad doings.

"...if the plutocratic element were removed."

Every country in history has been a plutocracy. Even in poor countries, the wealthiest control things. In fact, the less freedom there is, the more plutocratic the country is. Free markets keep the wealthy on their toes, lest a better mouse trap put them out of business.

If you ever thought you were a Libertarian, I doubt you understood what it meant. You would still be one. It's much easier to be a Liberal, when the world is so easy to understand with pat explanations of good and evil.
By neiman1

5/10/09 at 10 a.m.

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What makes a progressive tax system a good thing?
By gunowners4obama

5/10/09 at 10:29 a.m.

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Maybe McCord would have a point if the system worked without corruption, ole boy networking, sleaze, etc etc etc. It doesn't. Until the rest of the human race stops fawning over and flattering the piggishly greedy, and treats them as the immature, narcissistic, sick things they are, nothing will change.
By dustman444

5/10/09 at 10:57 a.m.

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Lazyfaire is correct when he says "The free market assumes only that people will act out of self-interest. Competition ensures fair and reasonable." But as Alan Greenspan said, his biggest mistake was assuming that people would act out of self interest rather than greed. And certainly competition ensures a fair and reasonableeconomy. That is why most business' today concentrate on limiting or eliminating competition by buying up competitors or forcing them out of business.
Capitalism has become a game instead of a business. The goal is to see how far you can push the envelop without getting caught. And when the envelop finally falls over the edge, everyone wants a do over.
By lazyfaire

5/10/09 at 12:09 p.m.

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To paraphrase Winston Churchill: Free markets are the worst way to organize economies, except for all the rest.

Free markets don't prevent bad behavior. They just minimize it. Government intervention sets up "ole boy networks" and protects big business. Greenspan is a free-market economist who was in a regulator's role. He's trying to rationalize his decisions in that role. Greed is a common human vice. You can't regulate it out of existence, nor can you eliminate its effects through regulation. A free market eventually forces greed to fail through competition.
By Purgatory

5/10/09 at 2:18 p.m.

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...I was going to confirm Mr McCord's statement, but 'lazyfaire' made a superb defense against CactusJack, gunowners, sundog, et al...I shall concur with him/her...I will only add this simple truth - the absolute beauty of free markets and hence, a free economy, is that it is ALWAYS self correcting when not 'fixed' by governments...ALWAYS!!...when the markets get ugly, unfair, out of control - pick a term - they get corrected...did I mention always?...ALWAYS!!
By ksand99

5/11/09 at 8:51 a.m.

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The little regulation and oversight that Bush left in place is what prevented this economic disaster from becoming a world-wide catastrophe.

Free markets are self-correcting? At what cost?

What you are supporting and proposing is a cycle of boom and bust periods. Regulation can help to smooth that cycle out by providing oversight and accountability in areas the free market cannot.
By lazyfaire

5/11/09 at 5:03 p.m.

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Booms and busts occur with or without regulations. We have thousands of regulations, and they didn't stop the current bust. The freer the market, the quicker the recovery. Overly regulated markets, like the 1930's, take longer to recover.

The current downturn had its genesis in Congress, both parties. That is, government interference in free markets that had functioned beautifully for five decades, without bankers getting greedy, set the housing market on a destructive course. The mortgage and securities markets responded to the carrot-and-stick policies of Congress, with predictable results.

The free market is the goose that lays the golden eggs. Don't kill it.