Regulating Freedom – Making Markets Free
by Gabriel Cross
Freedom is an elusive concept. It has many definitions in many different traditions and fields of study. Even in economics, where most Americans associate the word freedom with unregulated markets, there are many, often contradictory definitions. Most of us have only an intuitive understanding of the concept, and would be hard-pressed to define what we mean by freedom, or, for that matter, “free market.”
The simplest definition of freedom, which any 6th grader can give you, is “the ability to do whatever you want to do.” If this is how you define freedom, then a free market, quite obviously, is one in which there is no regulation. By extension, a free society is one in which there is no law and no authority, in which no one can tell you what to do. This is unfortunately a pretty juvenile definition, and it is not difficult to imagine that a society with no laws and no authority would be wide open to the tyranny of the strong-willed, the well-armed, or the unscrupulous–or, worst of all, all of the above. There is a word for this system (or lack of system) of political organization, and it is anarchy. The trouble with anarchy is that it invites tyranny. And the only way for a people in a state of anarchy to fight tyranny is to organize a system of their own, which is why there has never really been a viable anarchist society anywhere on earth for long.
Some system of law and authority must exist in order for freedom to be possible in a society. To demonstrate this point, ask yourself this simple question: Can a society be free in which there is no law against murder, or no law against theft? The answer is self-evident; if theft and murder are not outlawed and punishable, then the freedom of all is hampered by the fear of violence and theft.
These insights into law and freedom, which seem so obvious when discussing politics, are rarely encountered in discourse about free markets. Instead, there is a black-and-white world of regulation versus freedom. This constitutes, in my humble opinion, a classic example of a false dichotomy. A totally “free” market, in the sense of no regulation whatsoever, has never existed, much as an anarchist state has never really existed. Just as the society without laws is subject to the tyranny of the powerful and unscrupulous, the market without regulations is subject to manipulation by the economically powerful and unscrupulous. Just as there are crimes which all societies agree they cannot abide, there are market crimes that are disruptive to all. For example, cornering a market to reap huge, undeserved profits must be illegal, or else those with resources will do it again and again to steal money from those without.
A market which is truly unregulated can never be free. Much like the anarchist society, it must agree upon rules or else have the tyranny of the powerful imposed upon it. Furthermore, a market held hostage by the powerful cannot thrive. It is only in a market with rules agreed upon by all players–and infringement of those rules punishable–that we freely engage in the commerce that improves our economy, and by extension the well being of our citizens. Rules and regulation reduce uncertainty, mitigate risk, and create an environment in which people are confident participating in a market. In a sense, stable and logical regulation make markets more free in the same way that just laws make societies more free.
In light of the discussion above, it seems obvious to me that some regulation in a market is not only inevitable, but demonstrably beneficial. The question then shifts from “should the market be regulated?” to “how should the market be regulated?” Because the individuals in a market are necessarily thinking only of the short-term gain, one answer is that the role of any regulators should be to protect the long-term viability of the market as a whole. For this reason, regulation of markets which are designed to address issues of sustainability are not infringements upon the freedom of the market–they are just the opposite–structures designed to prop up the market for all of society, for generations to come.
Any time a government body seeks to regulate a market for the cause of sustainability, there is significant backlash from the businesses and individuals profiting off the status quo. In every such instance, the argument is made that any regulation is an impediment to freedom. In reality, if a proposed regulation actually helps to ensure the sustainability of society, it cannot be viewed as an impediment to a free market; though it may impose upon some individuals right now, it does so to ensure the viability of the free market for generations to come. This long-term stability is in fact essential to the functioning of a free market economy over time; much like the law against theft in a free society, it limits certain actions by the individual to ensure the freedom of the group.
Regulations, rules, and laws are not the antithesis of freedom. Quite the contrary; a system of laws or regulations is necessary for the freedom of a society and a market alike. Over time, a system of rules that promotes stability and productivity can help to ensure both freedom and sustainability as sure as no system of rules leads to anarchy, chaos or tyranny. Regulations are not impediments to free markets; consistent and fair regulation makes markets free.