Esoteric Dissertations from a One-Track Mind

May 26, 2008

RE: Why People Don’t Trust Free Markets

Filed under: capitalism, economy, politics, science — Tags: — codesmithy @ 7:32 am

Michael Shermer wrote a post on his blog called “Why People Don’t Trust Free Markets.” Shermer is the founder of the The Skeptics Society and editor of its magazine Skeptic. Skeptic magazine is dedicated to investigating and debunking junk science and supernatural claims.

For me, Shermer is a little bit of a mixed bag. He gave a good talk at TED on “why people believe strange things.” I criticized one of his columns in Scientific American on “Rational Atheism.” So any criticism of Shermer should be tempered against the good work that he does. It is a phenomenon that people tend to hold greater disdain for those they disagree with slightly than completely. A young-Earth creationist can be dismissed as haplessly misinformed. Their employment of logical fallacies and poor evidence is not notable, it is expected. Shermer, as a person who advocates a more rational understand of the universe, employs similar canards; it feels like an outright betrayal. He should know better!

Shermer starts off by quoting Ludwig von Mises:

The truth is that capitalism has not only multiplied population figures but at the same time improved the people’s standard of living in an unprecedented way. Neither economic thinking nor historical experience suggest that any other social system could be as beneficial to the masses as capitalism. The results speak for themselves. The market economy needs no apologists and propagandists. It can apply to itself the words of Sir Christopher Wren’s epitaph in St. Paul’s: Si monumentum requires, circumspice.

Noam Chomsky breaks apart this argument when asked if capitalism is making life better?

As Chomsky correctly notes, one could say the same thing about slave societies. As a skeptic who knows the importance of tracking the failures as well as the successes, I am surprised he employs this line of argument.

Next Shermer goes on to state:

Market solutions to social problems are generally received with skepticism. Businessmen are distrusted, corporations looked at askance, and there is a well-known resentment against those who have most benefited from markets.

I’m surprised Shermer doesn’t offer any examples for this. What is an example of a market based solution to a social problem? Would school vouchers be a fair example? Or is “a market solution” turning over a municipality to a private entity.

Businessmen should be distrusted. Anytime some one is trying to sell you something, their claims should be looked at skeptically, especially because they have obvious incentive to cheat.  Corporations are distrusted because they are incredibly powerful and largely, publicly unaccountable institutions.  By their very nature, they are one-share, one-vote, not one-person, one-vote.  This has major ramifications for so-called “externalities.”  See ship breaking in Bangladesh for an example of externalities.

As for resentment towards the biggest winners in a free-market, I know of no way to meaningfully quantify it.  Even for Bill Gates, his book “Business @ the Speed of Thought” was a best seller near the time it was released.  Is that antipathy?  Is that resentment?  Buying a book that he wrote?  Yes, there are people that don’t like Bill Gates, but that seems indicative of any public figure.

Shermer then gives a sketch of historical development from hunter-gather tribes explain “evolutionary egalitarianism” or the collective reversion for “excessive greed and avarice.”  Then Shermer pulls a remarkable rhetorical trick:

Throughout most of the history of civilization as well, economic inequalities were not the result of natural differences in drive and talent between members of a society equally free to pursue their right to prosperity; instead, a handful of chiefs, kings, nobles, and priests exploited an unfair and rigged social system to achieve gains best described as ill gotten.

I would love to see this great break in history where society moved to a pure meritocracy based on a free market.  It is telling that whenever a country democratically decides to redistribute land to undue some of the “ill gotten” gains of the past, the United States has seen fit to intervene as was the case in Iran, Chile and Guatemala.

The most laughable part of the piece, and the most unconscionable is Shermer citing “well-documented liberal bias in the academy and the media against free markets.”  It absolutely must be screaming in the back of Shermer’s mind that the argument he employs in this section is exactly the same tactic intelligent-design advocates use to claim bias against their espoused ideas.  There are not two, equally valid sides to every issue.  Setting up a false dichotomy and adhering to the doctrine of “centerism” is incorrect on its face.   Arianna Huffington posits it as equal time for lies.  If Shermer wants to demonstrate some bias against free market ideology, he needs to improve his method.  He needs to look at individual stories and pick out irrefutable inaccuracies.  The “centerist” doctrine he tries to employ is worse than worthless.

Shermer then concludes:

This is, in fact, why WorldCom and Enron type disasters still make headlines. If they didn’t — if such corporate catastrophes caused by egregious ethical lapses were so common that they were not even worth covering on the nightly news — free market capitalism would implode. Instead it thrives, but just as eternal vigilance is the price of freedom, so too must it be for free markets, since both are inextricably bound together.

Capitalism and freedom are not inextricably bound together.  They are frequently diametrically opposed propositions.

Naomi Klein investigated the link in “China’s All-Seeing Eye.” Shermer sentiment is no more true than when Milton Friedman pitched it.

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