Free Market Economics: The Inept Cousin of Real Social Science

You can call this privileging disciplines if you want, but I would gander that if one took the best of the best of modern social science and psychology and put the field of economics to the test, much of what is talked about as free market theory is in contradiction to recognized sociological and ecological fact. And this would only be reinforced by a host of fairly common experiences of modern life. A kind of theory that often more or less brushes off much of social reality as an “externality” just isn’t going to be that descriptively useful or accurate at the end of the day, since it’s trying to make sweeping claims about society based on a highly limited and inaccurate model.

Free market economics is a simple, and some would say elegant, story. This story would generally have one believe that social good tends to be the unintended consequence of the pursuit of individual economic self-interest and accumulated private property (“the invisible hand” in a nutshell), while the intended pursuit of social good tends to lead to ruin (the scapegoating of socialism). This is supposed to be a counter-intuitive general truth about social interaction. There is the linked belief in competition as the driving engine for order and progress (and in the case of typical Randians and conservative libertarians, heroic captains of industry).

The free market idea is frequently used as support for the belief in a social order based on private property and accumulation, I.E. capitalism, that this is voluntary by definition, and then this is reinforced through the culturally ingrained ethos of “winning” and “growing”. There are certain 19th century and turn of the century notions of “progress” that go along with this, and there are overlaps with social darwinist theory, which took the competitive aspect of Darwin’s idea and ran with it even though it doesn’t entirely jibe with Darwin himself. Perhaps there is a grain of truth in the idea that there can be positive side effects of people’s apparently selfish decisions, but free market economic theory often generalizes or universalizes this in an ideological way.

The story just doesn’t square up to human experience. The freedom of enterprise is not my freedom (*insert left-wing interpretation of Max Stirner here*). The pursuit of self-interest within markets does not inherently lead to nothing but win-wins and markets are not a self-correcting machine that is intrinsically and infinitely adaptable to human needs. Structuring society around a competitive ethos has not been without consequences for social ethics and psychology. Economic power is not a harmless thing in a social vacuum. Choices within markets are not necessarily meaningfully voluntary, and social conflict is not an externality to markets. It also turns out that there are many ways in which we’ve been learning that technology is a double-edged sword and that there’s this thing called a progress trap. Realities of class, the environment, and technology, all challenge free market theory.

Historical fact is that the socialist, anarchist and communist movements came into existence in part as a reaction to this kind of liberal theory of capitalism and the early implementation of such ideas. It is important to remember that the orientation of Marxism and much of early anarchism was anti-liberal, and it is no coincidence that so much of free market libertarian ideology is mired in 19th century liberal thought. The march toward what was to become global capitalism created some serious social ruptures and introduced new difficulties into society. A century later, problems have continued to develop in ways that even Marx – who frankly does a decent job of identifying the problem during his own time – could not foresee.

For the most part, the liberals actually won and got what they wanted (relatively free reign for enterprise), only they were unprepared for the reality of growing state intervention and bureaucracy that inevitably came with the development of capitalism. They would never admit it, but there is realistically no way to develop and maintain large-scale global capitalism without the expansion of the state. They’re often left in a position of denouncing the modern state while continuing to believe in the principles and political ideas that necessitate it. The left-libertarian, Carsonian spin on this question is the idea that anti-statism is the road to non-capitalism.

My statement can be misread as supporting the “free market anti-capitalist” view, but it’s more complicated than that, since I’m emphasizing that the play and growth of market forces, of accumulation and competition, were an important causal factor for the growth of state power. In contrast, the “free market left-libertarian” view is all about emphasizing the notion that state power has aided the growth of economic power, which while true at a certain level is not definitive of the problem of capitalism and often leaves them blind to the ways in which markets generate their own problems and that the modern “welfare state” only exists in large part because of the inadequacies of markets. To admit any of this is simply ideological heresy in contemporary American libertarian circles. They are ideologically trapped by ideal-market notions.

The key aspect of this that free market libertarians wouldn’t accept is that the principles of free markets and property necessitate the modern state. In simply removing state intervention without removing the norms of property and markets and directly challenging economic power, one does not end up with non-capitalist society. What one ends up with at best is more like a reset button to the 19th century, to earlier capitalism, in which the modern state can reformulate itself all over again. Except even that isn’t accurate, because the current social climate is such that economic power is so large and ingrained in society that one may as well say that the result wouldn’t likely be far off from the kind of dystopia associated with anarcho-capitalism – a kind of neo-fuedal order in which powerful economic entities take on the functions of the state.

Some libertarians react to this hard reality with shock and denial, reducing it to the common strawman of Hobbesian pessimism run wild. They generally tend to think of it as scare tactics. But it just comes down to realistic expectations of human behavior, plus a critical analysis of society that doesn’t just treat the state as a primary part of a binary. Libertarians would have us believe that they are solving an antagonism between economy and state in a pretty straightforward dialectic in which the economy wins and we all are free, while real-world social dynamics seem to indicate a complexity of antagonisms that aren’t at all easy to resolve. Sorry to be cliche, but it’s just not that simple. Weakening of state power does not inherently lead to non-capitalist society any more than capitalism naturally progresses to communism. Economic power has a capacity to produce political power, as well as generate social conflicts and issues without the necessity of state bureaucracy.

It is quite fascinating that a discipline about economies is so strongly founded in the denial of economic power. This has left many libertarians with little choice but to engage in questionable historical revisionism blaming everything on the state in order to keep their ideology intact. It’s the impetus behind why Austrian economists have to try to elevate their methods over the contrary findings of social science in the modern age and characterize their claims as ahistorical facts of human action. It’s why Murray Rothbard had to explicitly deny the existence of economic power, to keep the libertarian ideology safe from reality. Austrian schoolers aside, whatever school of free market economics one favors, I say a pox on all your houses.

Libertarianism As Capitalist Mythos

I stumbled across a piece from half a year ago that talks about myths about capitalism and communism. While I’m not necessarily interested in promoting communism as such (I declare no allegiance to a particular political group ideology, even if some of my criticism overlaps with Marxism), I do think the author brings up a number of valuable points about myths of capitalism which also happens to be part of what one has to deal with in discourse with American libertarians. I’ve made it pretty clear that I think contemporary American libertarian thought is drenched in capitalist ideology, even often in cases in which its proponents try to disassociate themselves from capitalism and expand their thinking leftward.

Part of the problem is that libertarians typically tend to have a universalized definition of property (to the point of defining metaphysical personhood in terms of ownership, which is really what the whole “self-ownership” problem is about), and hence frequently don’t appear to recognize some meaningful distinctions in types of property and the distinction of property vs possession. The article helps clarify: “Property implies not a good, but a title – deeds, contracts, stocks, bonds, mortgages, etc“. Since libertarians frequently confuse the difference between this and simple possessions, they frame their arguments as if to attack property is to attack the apple in their hand, quickly turning the debate toward a red herring.

To expound: property as a modern concept is very much based on legal fiction and economic institutions, not small-scale individual homesteading and exchange in a vacuum. Libertarians often like to describe the nature of modern large-scale economies in terms that apply to a non-existent social context or even what would really have to be a pre-capitalist and even primitive context. The concept of homesteading is hardly applicable to a modern urban society not filled with survivalists (unless your real goal is to be an expat of modern society and try to start anew in the South American jungle), and the description of everyday market activity as if it was nothing more than a consensual exchange between two people rubs up against our everyday experiences of the market as a powerful dynamic of institutions that individuals have to maneuver within.

The institution of property rights is mainly represented by titles and contracts for land, institutional control, profit, investment, and so on – not by the things around your house. It is about special rights to resources and power, not commonplace rights to have things. By the way many libertarians talk about property, it’s as if they want to apply the logic of small-scale commonly recognized possession to things that are detached large-scale institutions and non-concrete entities. It is very typical in debates with libertarians for the libertarian to default to a simplistic scenario about possession in defense of a not-so-simple matter dealing with institutions of property, or for them to generally frame their positive description and defense of markets in terms of informal and small-scale trade or a reference to a pre-capitalist society.

The narrative that the market as we know it simply formed as a cumulative result of a process of land cultivation by settlers and isolated small-scale exchanges – including the narrative that only/chiefly the modern state is or can be to blame for modern economic problems, as the force impinging on the market as this natural spontaneous expression of freedom – is basically capitalist mythos. The libertarian myth of economics is basically that there is this thing called “the free market” that is a natural spontaneous force of freedom, and that anything that might be considered wrong with the market in general can only or predominantly be chalked up to the state’s interventions in it – and even if we recognize a sense in which the market is flawed, the optimal solution is to do nothing because it tends to work its own problems out.

Technically, libertarians talk about “the free market” as something both presently existing and not truly existing at the same time – qua libertarian ideology it exists as a natural force within society insofar as this spontaneous economic activity goes on among humans or insofar as people choose to buy, sell, and trade things, but it doesn’t “truly exist” in its ideologically consistent form because of the state. This enables them to split hairs in discourse in ways that are convenient for preserving their ideology, because whenever anyone attacks modern capitalism they can claim that it’s not a “true free market”. At the same time, the libertarian can refer to contemporary phenomenon as evidence of the virtues of “the free market”, insofar as it superficially resembles a free choice or is thought of as part of the undercurrent of natural market activity that persists in spite of the state.

Thus I don’t think statements from the article such as this one would be misguided as part of arguments against libertarianism:

“The idea that we’re all going around making free choices all the time in an abundant market where everyone’s needs get met is patently belied by the lived experience of hundreds of millions of people. Most find ourselves constantly stuck between competing pressures and therefore stressed out, exhausted, lonely, and in search of meaning. — as though we’re not in control of our lives.”

Libertarians, even some so-called left-libertarians, want us to believe that there is this natural economic force of freedom chugging along in society that is responsible for the bulk of social good, only it’s constrained by the state – and that if only we remove the constraints of the state, the natural result will tend to be an improvement in social good. In libertarian capitalist ideology, the market as a free pursuit of economic self-interest by individuals is the prime source of social good as an emergent property. In reality, the pursuit of economic self-interest within the confines of economic power introduces a whole series of social problems. It is a mixed bag at best in terms of social good, and your freedom within the market is largely illusory precisely because of the institution of property, bad human behavior, and the psychological affects of it all.

The everyday experiences of most people should attest to the fact that consumer sovereignty is a myth and that the voluntary nature of employment is a myth. Markets represent an environmental condition that one has no choice but to engage with, no less than the state. For most people, conventional employment is just an adaptive necessity of life and entraps them into playing along with organizational dynamics and competitive pressures. Marketing teams and businessman in the hierarchy, who for most of us are faceless strangers, essentially engage in attempts to *pitch* products to you or tell you what you need, have organizational incentives to do whatever it takes to bring in profit, and significantly have a role in determining what your practical options are before you even start making decisions. The idea that the production cycle is all just a reactive mechanism to people’s authentic needs and wants is misleading.

Perhaps markets don’t adapt to people as much as people adapt to markets. The psychological affects of markets on employers and various businessmen often amounts to a series of incentives for them to do what is necessary for the economic institutions they are beholden to, even if it means actively working against the interests of employees and consumers and turning themselves into moral monsters. Once they are ideologically embedded in the system, they even think that their moral monstrosity is virtuous and just. It’s called drinking the corporate cool-aid. Try working under someone in management in the retail industry who’s been invested in it for some years, and you’ll likely see what I mean. They’ve built their whole lives and personal identity around this, have bought in to the buzzwords and ideology of sell sell sell, and unfortunately their roles often make them into crass, petty, penny-pinching people who internalize a conservative ethos and treat their workers as expendable resources.

The article states this point well enough:

“Even that boss (the apparent victor in the “free exchange”) isn’t free: the market places imperatives on the ownership class to relentlessly accumulate wealth and develop the forces of production or else fail. Capitalists are compelled to support oppressive regimes and wreck the planet, as a matter of business, even as they protest good personal intentions”. 

On the side of average workers and consumers, the conditions presented to them as the market are something that they have had to adapt their lives around. Their corporate cool-aid drinking bosses are just something that they have to work with. The bureaucratic norms of businesses are something that they just have to engage with to maneuver through society. And competition with others for the chance to secure the necessities of survival (plus a bunch of manufactured wants that have taken on a life of their own) is incentivized. Some people become brown-nosers and aggressive social climbers, some people internalize the values transmitted through markets against their own concrete interests, some people take to crime. All this is a matter of psychological incentives involved in markets and the consequences of basing societal needs on markets.

Since the incentives of capitalism are based around continual growth and the pursuit of profit, it has become a kind of machine that subsumes human values. The libertarian idea that the market is just *us* and our internally or autonomously determined values, manifest through trade, relies on isolating individuals as market actors devoid of real social context. The people who realistically are in control of the market have a notable affect on the setting of the framing for what is portrayed as valuable in popular culture. More broadly, the market has generated its own values that more or less tend to encourage and reward narcissism, dishonesty, and the drive to “win” at the expense of others. The market has its own culture, and it will not balk at appropriating any culture or value it comes across for the higher value of its economic self-actualization.

Much of the problem with libertarianism centers around the fact that it can’t square its lionization of markets with social and psychological reality, and that it therefore ends up disguising tyranny and social ill in an illusionary narrative about individual choice and personal freedom; whether conciously (libertarianism as snake-oil salesman for capitalism) or not (libertarianism as dupes for capitalism). It is an ideology that does not particularly recognize that economic forces as such can be a significant infringement on personal freedom, and that the nature of modern economic life determines and restricts choices. It is stuck in the trap of either crassly denying or even rationalizing the problems and nastiness involved in markets (vanilla and right libertarianism), or gaining conciousness of them only to default to denialist anti-statism anyway and continueing to promote ideological tenets that perpetuate/enable what they want to decry (left libertarianism).

Ultimately, I had to leave libertarianism because my experience of the world clashed dissonantly with its rhetoric about property and markets, and as I teased out the negative social consequences of taking those ideas to their conclusions. What started as horror at the overtly nasty underbelly of libertarian ideology (which is a big part of the impetus to left-libertarianism) eventually turned into a deconstruction of its basic tenets and common tropes (self-ownership, property rights, homesteading, the non-aggression principle, methodological individualism, and so on). When I look at it now, much of it is capitalist apologetics even when it isn’t trying to be, and much of what I wanted to separate myself from as a left-libertarian is perfectly compatible with that core ideology. The core ideology needs to be addressed at the root.

As some libertarians like to say: strike the root.

The Economic Organism as Panopticon

As I stated in my piece on left-libertarianism, I don’t think libertarians generally grasp the essence of the problem with capitalism. The problem with capitalism is that our society has come to be shaped and structured around the concerns and conveniences of economic power. The success of humanity becomes measured not by overall well-being, but how much the market has “grown”, how well the world has been integrated into the industrial economic organism, and hinges on the volatile balance of stock markets in a kind of game of economic roulette. Our lives have become hostage to the games of economic powers outside our control.

It behooves us to recognize that the following things grant a form of power:
The ownership of land or public space – affects the right of others to existence in a given space, to have shelter, to travel, grants regulatory authority and power of exclusion to the owner(s).
The ownership of or access to large sums of money – affects the ability of individuals to obtain the needs of survival, opens avenues of political power, presents the opportunity for corruption.
The positions of authority within a business hierarchy – affects the ability of people to act as autonomous individuals and to speak freely, grants control over production and opens avenues of narcissism and bullying.

An important aspect of capitalism is that the average person, to one degree or another, must sacrifice some of their autonomy to the ownership class and business hierarchy in order to function in society and obtain the means of survival. This is a power dynamic unto itself born out of the play of economic forces – and the modern state partly developed out of the growing demands of those economic forces. The state did not intervene to force business to coalesce and become corrupt – it mainly did on its own. Rather, the state patterned itself around the reality of modern economic organizations and formed something of a symbiotic relationship with them. All the same, the economy has become such a big and complex organism that it is impossible to particularly control.

When you are born into the society, you are entering a complex social and economic framework of conditions that constrain your decision-making and even shape your psychology. You are “free to choose” and have earned the right to live – if you have the money. You are “free to get the money” and have earned the right to live in relative contentment – if you play by the rules and sign away a portion of your rights. In other words, you must rent and buy the privilege to not live as a criminal or brute, or a total dependent, from those who have monopolized resources. And your privileges come with the stipulation that you obey and play your role in the economic system, don’t complain, and maybe become a bit corrupt in the process.

You are also bombarded with media and marketing, always being “free to indulge” by handing over your money and being granted a “free press” within the confines of what is allowed by the business interests who mostly own the media. The continued development of consumable and dispensable products both helps keep contentment in society as a kind of pacifying force and allows business interests to continually make more money. The forging of personal identity and human relations becomes partly based on choices of consumption, and this especially impacts the forging of the psychology of young people in an atmosphere of media. Aside from the economic organism depending on you being a docile worker, it also encourages you to be a docile consumer.

Capitalism is also an ideological matter – it involves the crafting of “common sense” ideology that takes its necessity for granted. The narrative that the market is just the spontaneous result of free exchanges (as if it’s just a bazaar blown up to the global scale), obscures the larger structural reality and social dynamics of the situation; that your choices in the economy are largely determined and influenced by organizations and structures of power outside your control. Much like the illusion of political democracy being about public choice when it is represented by an oligarchy, “economic democracy” is not the reality of market interaction. And the narrative of the work ethic and social mobility, once internalized, traps people into supporting their own oppression. That’s capitalist ideology at play.

As long as the individual worker, consumer, and general economic agent does not particularly question the social norms that are taken for granted in capitalism, the economic system is their panopticon. A prison that they don’t even know they are in, with an extensive profile on their consumption habits and work history, a debt cloud hanging over their head, and a large bill for them to pay for the excesses and mistakes of their corporate masters. Even people in relative positions of economic power can be, in a way, imprisoned by the needs of the economic system, beholden to economic interest over anything resembling justice. They have a role to play too. Organizational ties bind us into doing what is best for the organization, whether we are casual wage workers or people in the business hierarchy.

Libertarians need a broader social theory if they really want to support human freedom and well-being. Support for “free markets” doesn’t cut it when the market is a behemoth of power of its own. Whatever extent one wishes to pin the cause of that power on the state (and of course I think the state has less of a role than libertarians claim), we have to cope with the realities of economic power as they currently are, and we can’t just call for the abolition of the state and expect economic power to automatically work out its own problems. We must realize that economic power enables social control and entraps us into participating in our own exploitation as a society. Smash the economic panopticon!