The free market and rent-seeking

February 2, 2021 6:20 PM

When you hear the phrase "free market," you probably think of "a market that is free from regulation" but that's the opposite of the phrase's original meaning! Cory Doctorow on the 'free' market, rent seeking, London, speculation and poor doors.
posted by signal (37 comments total)

"..all for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind." -- Adam Smith, Wealth of Nations.
posted by storybored at 7:03 PM on February 2, 2021 [20 favorites]

I wouldn't have assumed anyone else thought that, either. But whatever.

Really, nobody? Have you listened to Republicans for the last, oh say, 40 years starting with Reagan and ending with Bush and Trump?
posted by JackFlash at 7:16 PM on February 2, 2021 [70 favorites]

But you are right. Republicans like some regulations. Like regulations that prevent people from suing doctors or hospitals. Or regulations that prevent doctors from discussing abortion with patients. That kind of regulation Republicans like a lot.
posted by JackFlash at 7:32 PM on February 2, 2021 [29 favorites]

Republicans with more than two neurons have not confused deregulation with free market economics. And tended to champion both. The Trump party ramped up the cronyism part with the former and have pretty much abandoned the latter. Most Republicans were either not smart enough to have noticed, or unprincipled enough to not care.
posted by 2N2222 at 7:33 PM on February 2, 2021 [1 favorite]

There's a great—apocryphal—story about a conversation between Kerry Packer (at the time, the richest man in Australia, a media tycoon and monopolist) and the then-Treasurer, future Prime Minister Paul Keating (who, despite leading the Labor Party, led a number of neoliberal economic reforms around opening the Australian economy). They were having an argument about media ownership regulation. 'You know what your problem is, son', Packer was supposed to have said, 'I believe in capitalism, and you believe in the free fucking market'...
posted by Fiasco da Gama at 7:54 PM on February 2, 2021 [7 favorites]

Actually, juxtaposing the current idea of free market with the original does get to the heart of the matter.
posted by blue shadows at 10:20 PM on February 2, 2021 [3 favorites]

FWIW, my (ESL, no economic background) first thought when hearing the phrase "free market" is indeed "free from regulation".

Off to read the linked article!
posted by Harald74 at 10:47 PM on February 2, 2021 [5 favorites]

I can’t think of a shorter name for what Amartya Sen referred to as the "propensity to truck and barter". ...Maybe he couldn’t either!
posted by clew at 11:02 PM on February 2, 2021

When I hear “free market” I think “magic pixie dust scattered by the Invisible Hand, the sparkly motion of which hides state capitalism and crony capitalism underneath.”
posted by XMLicious at 11:10 PM on February 2, 2021 [9 favorites]

While banging on about the word "free" he still manages to use the word "affordable" without a hint of irony.
posted by Cardinal Fang at 12:24 AM on February 3, 2021 [1 favorite]

Builders like those behind the Battersea Power Plant conversion renege without consequence: they pledged to make 15% of the new units affordable, then slashed it to 9%, claiming "technical difficulties."

Very similar to developers I encountered in the US in a small, growing community in the Utah desert. The Construction companies would dissolve themselves to avoid having to build the playgrounds and other amenities they agreed to, then reform under another name and start over.
posted by mecran01 at 3:30 AM on February 3, 2021 [15 favorites]

Republicans like some regulations. Like regulations that prevent people from suing doctors or hospitals. Or regulations that prevent doctors from discussing abortion with patients. That kind of regulation Republicans like a lot.

The always-useful definition of conservatism as "There must be in-groups whom the law protects but does not bind, alongside out-groups whom the law binds but does not protect" applies to economics as well as politics.
posted by Gelatin at 5:36 AM on February 3, 2021 [24 favorites]

I seem to have developed an eye for this kind of thing, what we in SW development would call "anti-patterns", from reading this FPP and many others on this site. Just the sheer ingenuity that we humans employ to fuck over our fellow travelers on this blue marble, and how systematic it often is. Hopefully I'll recognize it every time it rears its ugly head near me as well.
posted by Harald74 at 6:28 AM on February 3, 2021 [1 favorite]

When you hear the phrase "free market," you probably think of "a market that is free from regulation"

There's a line from Albert Cossery's novel Laziness in the Fertile Valley that has stuck with me:

"When a man talks to you about progress, you can be sure that he wants to subjugate you."

That's what I think about when I hear "free market".
posted by ryanshepard at 6:46 AM on February 3, 2021 [7 favorites]

This article fits so neatly into my confirmation bias that I am extremely wary of it. When I go to wikipedia to look up what is in the "Free Market" article, it does say in the second sentence:

In a free market, the laws and forces of supply and demand are free from any intervention by a government or other authority.


Which to me means "free from regulation" (as regulation = intervention?). This would have been my definition if you asked me on the street what a free market is. And I would also guess that Wikipedia matches the "consensus" of definition of what it is in common vernacular, even though that might not be what Adam Smith originally meant by the concept.

When doing more digging, I came across this article which does seem to support the notion that Adam Smith's free market was not free from regulation. But.. I don't know. It just seems like a lost cause to try to convince someone who is a "Free Market Capitalist" that their definition is wrong and they really support governmental intervention when they don't.
posted by pol at 7:03 AM on February 3, 2021 [5 favorites]

I have taken quite a few economics courses (a long time ago), but I've always heard 'free market' as being one that (and I might be missing some factors): 1) allows reasonable price discovery 2) has multiple competitors and multiple buyers 3) participants are free not to buy without injury 4) disputes are able to be handled equitably.

In any case, many of those factors imply government regulations.

So this sentence
In a free market, the laws and forces of supply and demand are free from any intervention by a government or other authority.
is only true in that it can be contrasted with the one that follows which is"Proponents of the concept of free market contrast it with a regulated market in which a government intervenes in supply and demand through various methods such as tariffs used to restrict trade and to protect the local economy."
posted by The_Vegetables at 8:04 AM on February 3, 2021 [2 favorites]

I have taken quite a few economics courses (a long time ago), but I've always heard 'free market' as being one that (and I might be missing some factors): 1) allows reasonable price discovery 2) has multiple competitors and multiple buyers 3) participants are free not to buy without injury 4) disputes are able to be handled equitably.

Within this framework, housing could never be a free market because people cannot go without housing. If you want to break it down between owning and renting, then owning theoretically can be a free market. But this requires serious firebreaks between owning and renting that are pretty rare on..Earth.
posted by The_Vegetables at 8:14 AM on February 3, 2021 [2 favorites]

Not that we should bow down to Adam Smith in all respects, and it's complicated, but saying that free of regulation is "the opposite of the phrase's original meaning" seems just wrong. Searching the Wealth of Nations, I find exactly one use of "free market," in a section arguing against trade restrictions on wool. Certainly "free market" includes the meaning "free from certain bad [and what is considered bad is very complicated and we won't agree but some are definitely bad] government regulations."
posted by Mr.Know-it-some at 8:29 AM on February 3, 2021 [4 favorites]

Whenever I hear the phrase "free market," I imagine Mike Myers saying, "Talk amongst yourselves, I'll give you a topic: the free market is neither free, nor a market. Discuss."
posted by Saxon Kane at 8:37 AM on February 3, 2021 [3 favorites]

I am going to chime in on the "free market" thing and say that it doesn't really matter what Adam Smith meant or what you learned in your economics classes. Currently most people that I have encountered understand it to mean free from regulation. When I google "What is a free market" the results page has for the "Dictionary"

noun
an economic system in which prices are determined by unrestricted competition between privately owned businesses.
"a free market in broadcasting"

And the answer to the first "people also ask" (What is a free market economy simple definition) is:

The free market is an economic system based on supply and demand with little or no government control. ... Free markets are characterized by a spontaneous and decentralized order of arrangements through which individuals make economic decisions.

I believe that most Americans are going to believe that a market is more free the less regulation it has. Correcting these people and telling them they don't understand what free market means is about as useful as when someone corrects my use of the word democracy and says "we don't live in a democracy we live in a republic." All I can think about them is that they are trying to appear smart by being stupid.
posted by Pembquist at 9:49 AM on February 3, 2021 [10 favorites]

Thanks for posting this. I clicked through the extract from Cory Doctorow’s novel Unauthorised Bread and am going to purchase it, was really quite gripping.
posted by ElasticParrot at 9:51 AM on February 3, 2021 [1 favorite]

Thanks for demonstrating the free market.
posted by storybored at 10:02 AM on February 3, 2021

TANSTAAFM
posted by tspae at 10:07 AM on February 3, 2021 [13 favorites]

Oh, uh, wait. Unauthorized Bread is published by Tor Books. Tor is owned by Macmillan Books, and MacMillan Books is owned by megapublisher Holtzbrinck Publishing Group.

hums and sings *it's a small world after all...."
posted by storybored at 10:07 AM on February 3, 2021

People should be free, not markets.
posted by biogeo at 10:21 AM on February 3, 2021 [4 favorites]

"Free market" is like many other oft-used, rarely-questioned loaner terms from the dismal science, in that it's essentially an appeal to a common phrase as a dogwhistle for the pre-convinced, so someone doesn't have to actually explain what they mean.

That said, if you don't know that it's often used as a stand-in for "unregulated" market then I have to assume you're not reading a lot of newspapers.
posted by aspersioncast at 10:22 AM on February 3, 2021 [1 favorite]

I have this mental thing where I sometimes Spoonerize vowels?
So the first thing I think of when you say 'free market' might be Fra' Meerkat; a little animal with a tonsure and monk robes, standing on tippytoe scanning the horizon.
posted by bartleby at 11:12 AM on February 3, 2021 [4 favorites]

It comes towards the end of the blog post, but I'm guessing that it's a response to this article, which came out yesterday.

As off-plan customers began to suspect that they had bought into an illusion, they rushed to sell their speculative investments back to the developers, leading to a phenomenon known as “Nine Elms disease”, as up to £2m was knocked off the price of some penthouse flats. “Battersea panic stations” announced one headline. While the practice of immediate relisting has now been banned, and prices have mostly stabilised, there are still signs of a glut of too many similar high-end flats, with some investors trying to dispose of entire floors of towers in Vauxhall. “It seems some people took a big bite of the pie,” said Ricci-Zak, “and it didn’t taste so good.”

posted by Grangousier at 11:37 AM on February 3, 2021 [1 favorite]

I took only microeconomics, and I don't recall a clear definition of free market, although there was a bit of talk about rent-seeking, and lots of graphs about monopolies, and something about competitive equilibrium. They're all related concepts. And most of college econ was not focused on critically philosophizing about what the terms and premises being used are, like what the fuck is utility
posted by polymodus at 1:52 PM on February 3, 2021

"Free market", deployed by those who deploy such terms, has always seemed to me to be shorthand for "I can't be bothered thinking about this seriously, because the only human that matters is me".
posted by turbid dahlia at 2:02 PM on February 3, 2021 [3 favorites]

It seems to me this is about an instance of poor regulation. To frame it as being about the whole principle of free markets is grandiloquence (or to be fair, maybe a redundant rebuttal of an absurd defence).
posted by Phanx at 2:27 PM on February 3, 2021

most of college econ was not focused on critically philosophizing about what the terms and premises being used are, like what the fuck is utility

Yeah I was econ-adjacent for about 8 years and there was an awful lot of "produce a time series" and "calculate AAGR," but not a lot of questioning of the clearly questionable shit underlying much of it.

But that's probably true of any "social science" pretending to be "hard" science, it's just that a lot more people base policy decisions on certain subfields of economics than on like cliometrics or digital humanities.

And as with many disciplines, there are great economists doing interesting work, and a whole lot of mediocre professional specialists whose opinions can be bought or solicited to add "expertise" to the continual machinations of the ownership class.
posted by aspersioncast at 2:29 PM on February 3, 2021 [3 favorites]

bartleby: There was a pretty successful advertising campaign in the UK built around that substitution. Simples.
posted by rhamphorhynchus at 2:33 PM on February 3, 2021 [3 favorites]

When doing more digging, I came across this article which does seem to support the notion that Adam Smith's free market was not free from regulation. But.. I don't know. It just seems like a lost cause to try to convince someone who is a "Free Market Capitalist" that their definition is wrong and they really support governmental intervention when they don't.

For me, there are two related points to arguing that Adam Smith did not favor unregulated markets. First, it goes to undermining an appeal to the authority of Adam Smith. I don't expect I'll convince a hardline "free market" fan that they don't really support laissez faire economics, but I might convince them that they don't really agree with Adam Smith.

Second, I hope to convince some people (primarily people on the fence, not the hardliners) that their common perception of economics and what it says is wrong. If I can make people think about whether the "heroes" of capitalism really supported what they are commonly said to have supported, then maybe I can shake them out of routine, lazy ways of thinking. Some of this sort of thing happened to me. I learned that what I had been told about, e.g. Smith, Darwin, and Marx, was just plain misinformation. Learning what they actually said shook up my beliefs in both direct and indirect ways.

I guess what I'm saying is: Don't give up. Some people can be persuaded.
posted by Jonathan Livengood at 3:18 PM on February 3, 2021 [2 favorites]

Are we going to do "liberal" next?
posted by pompomtom at 3:33 PM on February 3, 2021

Which to me means "free from regulation" (as regulation = intervention?). This would have been my definition if you asked me on the street what a free market is.

Using the Wikipedia definition you noted, it is important not to ignore the "laws and forces of supply and demand are free from any intervention" part, since it's literally the most important part in the traditional conception of what it means for a market to be free. I think it goes a bit too far, but overly strict adherence to almost any principle leads to absurd outcomes.

Point being that rules against misrepresentation and fraud, the implementation of universal standards of trade, some means of pricing in externalities, and the like do not in any sense make a market less free. Indeed, like laws against murder, violence in general, hate speech, and other offenses against one's person, they allow for more freedom, not less.

What does tend to fuck up markets are things like monopolization, cartels, and unnecessary price regulation. The first two exploit a power imbalance and the last often fucks up the allocation of resources in a way that leads to bare shelves, but can be necessary in the case of natural monopolies where all the power exists on the side of one party and there is no countervailing force to keep them from raising prices to (effectively) infinity.

Our system, if you can even call it that, is absolutely fucked right now. For a lot of necessary goods and services there are no effective market forces keeping the major players in check. We end up with the disadvantages of central planning and of a market system, combining into one big black hole of suck. I can take or leave capitalism, as it doesn't matter to the market who actually owns the enterprise, but markets have, for the most part, proven to be the best way of allocating production and signalling demand that we have yet come up with. There have to be limits, though, otherwise the negative externalities get out of control.

In my view, the other great driver of the fucked up nature of our current situation is the vast imbalance in who is reaping the benefit of labor and investment. Production can't be allocated properly when half of the population has no means to signal their needs and wants to producers because they have no fucking money because it's all being siphoned away by people whose avarice exceeds that of a mythical dragon laying on its hoard. Something must be done to improve the distribution of both income and wealth amongst the population as a whole. People starving in the streets or even just barely able to afford rent is a failure of the market and should be addressed. In some cases that's due to regulation, in others it's just developers being greedy fucks and banks being right fisted shit wads that refuse to lend money to anyone who won't do their level best to make all the moneys instead of accepting a lower, but still fair, return on lower cost hosting development. Why do that when the government will come along and pay the troll if they just wait a while. It's much lower risk, doncha know.

The misconception that freedom in a market means the freedom to abuse rather than freedom from abuse has probably been the single largest factor leading us down this path toward increasing wealth disparity and cartel control of many of the most important sectors of our economy.

It's all just so ugh. I can't help but rant in an only partially coherent way because it all makes me so fucking angry. One reason why I spend so much time on MeFi is that, while I may not fully agree with the ideas many people have, people for the most part are seeing reality for what it is and aren't just lying about it in the hopes the problems will just magically disappear if only we do a little more deregulation.
posted by wierdo at 5:18 PM on February 3, 2021 [4 favorites]

Unfortunately there are many areas of economics, and some of the loudest voices are (willfully?) ignorant of things like externalities and the need to regulate negative externalities.

At least this was a core topic in my undergraduate public policy economics class, with a textbook written by one Joseph E. Stiglitz, yes, the very same name you might have heard in relation to the Nobel Prize.

Unfortunately the useful focus on market design, eg a carbon tax to properly align business incentives, seems quite the opposite of certain modern policymakers and their funders...
posted by ec2y at 8:26 PM on February 3, 2021 [1 favorite]