visible and invisible hands

Douglas Den Uyl of Liberty Fund Inc. and Douglas Rasmussen, Professor at St. John’s University in New York ask the question:

what exactly is the connection between the visible hand of ethics and the invisible hand of the market?

If we assume, as most people do, that markets coordinate people based simply on mutual interest and consent, then the visible hand of ethics does not seem to have a place. They continue:

we know that in any social order we cannot allow people to do whatever may interest them. We shouldn’t be allowed to set up Murder Inc. So it seems we need some kind of rules even within a market system. This suggests right off the bat that ethics has a role to play in setting those rules. But then, why not let ethics set up everything?

This question concerning “where to draw the line” in relation to ethics, delineates libertarians from Liberals, conservatives, etc. While it is an important question, few people, even the most politically convicted, cannot answer it. They continue:

We could say that we stop doing ethics when the market approach of using interests rather than commands starts to work better than the visible hand of ethics. This response, unfortunately, brings us pretty much to a standstill in terms of how to proceed. On the one hand … there could be those who are less interested in what works and more interested in being sure that people do the right thing. On the other hand, there are those interested in what works, but who might have different opinions about what works better than what. Finally, besides those few who don’t think markets really work at all, there are those who might say that markets are okay in very limited spheres, but that ethics should really be the dominant way in which to organize people. All these qualifications seem to stand in the way of a robust defense of the liberty offered by the market. And if we went the other way and gave in to a largely market system, we would seem to be encouraging a culture of interest rather than one of ethical responsibility …

Their solution:

We, however, believe that this apparent “ignoring” of ethical concerns is not only justified but is actually a kind of celebration of ethics. In a certain sort of way, less is more. A lot less concern about adherence to commands and directives at the public level may mean a good deal more respect for ethics generally. We’re not saying that the liberty of the market will make people more ethical … we’re saying that this way of organizing society — giving people some simple rules and allowing them to interact with each other based on their mutual interests, agreements, plans, or projects — is an approach that gives ethics utmost importance in society.

How does this work?

Either society is structured around some ethical principle or set of principles such that the purpose of the society is to live according to them, or society takes some ethical principles to be central to it while leaving others for people to follow their own … we’ve got to be both general and specific at the same time with whatever basic governing principles of society we adopt. It still seems like we’re at an impasse. What kind of rule or principles could possibly both speak to everyone at the same time, allow for plural forms of living well, and not at the same time bias things in favor of one form of living well over others?

Their answer is the principle of self-direction. This means that within a social order, the first principle must be the protecion of the possibility of self-direction. The definition of self-direction is simple: the ability to make and exercise choices as an acting agent.

In protecting the possibility of self-directedness, it should be clear that we’re not trying to make people good or even increase their effectiveness in being self-directed. What we’re really trying to do by protecting the possibility of self-directed behavior is to give eithcs a chance.

While many people claim that markets are amoral, even immoral, Rasmussen and Den Uyl refute this:

It may seem that market societies are indifferent or ambivalent about ethics, but if so it is because they and only they recognized that there’s a difference between ethical principles that make ethical actions possible in society and ethical principles that guide us in what we need to do to live well or fulfill our obligations to ourselves and others.

Finally,

While there is solid evidence to support the contention that liberal orders make people generally better off, what is perhaps less well noticed is that liberal orders allow something deeper and more profound. They allow people to be human– that is, they allow people to employ their peculariarly human capacities of reason, judgment, and social sympathy towards ends and purposes they themselves have chosen. The market order is not, then, a dehumanizing institution, but the most human, and ethical, of them all.

(all quotations from “Visible and Invisible Hands”, see link in first sentence to read the entire article)

politics on kastanienallee

rein.raus, originally uploaded by iufberlin.

i took this picture near zionskirschplatz on kastanienallee.  not an uncommon message from the streets of prenzlauer berg.

 

unregulated play.

Adam Loos

When one is stricken with poverty in the European Union, the afflicted receive government funded housing, government funded health-care, and government funded food provisions. However, when a team in the German football Bundesliga becomes poverty stricken, it does not receive government aid, it sinks to lower levels. From within a heavily regulated economic system and society, one may expect every aspect of the society to be controlled in some way, in order to ”ensure equality”. While heavy regulation is present in most sectors within the European Union, the football clubs and their corresponding leagues are surprisingly exempt.

A football club sells one main product; players. This transaction affects their other main product: play on the field. In the end, good play on the field fills seats. Naturally, in order to get the best results, the clubs must be innovative. They create special academies to attract the best players, they scout new talent aggressively, and they provide intensive training and coaching in an effort to develop players that present attractive play on the pitch. Clubs must efficiently employ earned money from successful play to create better teams and thus better play. The clubs which utilize their money ineffectively generally sink to lower levels. When the London team, Chelsea, bought Shevchenko for the astronomical price of 30 million pounds sterling with limited results, Chelsea was not awarded compensation!

This competition for money and fans that relies on successful play on the field, results in high quality players, matches, and teams. Europe’s soccer leagues play at the highest level due to this healthy competition between teams. Furthermore, the football associations and clubs do not press for profit sharing, such a principle, based on some concept of “equality” is unthinkable. Imagine the Spanish bottom dweller team, Levante requesting a portion of the transfer fee of Luis Figo from Barcelon to Real Madrid, rumoured to be around thiry-eight million pounds! Nou Camp and the Catalans would be appalled and would never consider it. In comparison, even a non-sports fan can understand their disgust when they are asked to hand over nearly half of their hard-earned money in taxes.

The success of the European football associations is a compelling example of a working free-market transfer system, and an argument for the liberalization of trade between corporations. The increased competition between not only players and teams on the field, but also between the front offices of these clubs, dramatically proves this point. Increased competition creates innovation, in turn creating better football. When you watch your top-flight football team this weekend, thank the free-market.

nyc produce carts and the public health argument

a view from new york city. a look at municipal politics shedding light on the more general “macro” issues

Kevin Medina

New York City Council Speaker Christine Quinn recently began pushing a new bill that would create 1,500 new permits for fresh fruit and produce carts in impoverished neighborhoods, in order to battle the correlated obesity epidemic. “Impoverished” as such may be too harsh a word to describe these neighborhoods, considering the creep known as gentrification that has been changing said neighborhoods (please, detach yourself from its purported “negative” connotation), but they continue to be home to the lowest income earners in the city (Harlem, parts of Brookyln and the Bronx, and Southeast Queens).

At first, you may deem this scheme a classic instance of the government overstepping its bounds by artificially creating a supply absent of a clear demand, and “Let the markets decide!” may seem like a logical counter. I’ve read and heard this argument a number of times from New York Libertarians or small “c” conservatives (and you’ve only heard it if you’re wonkish enough to follow such mundane topics as permit awards!) and agreed at first. However, I have stepped back from my initial assumption and have taken a position in favor of Speaker Quinn’s bill.

The libertarian and “c”onservatives argue that by pushing for fresh fruit and produce stands in lower-class neighborhoods, the government facilitates an unfair competition between them and already established grocery stores. Others argue that areas in these neighborhoods with a demand for fresh fruit and produce are meet with a proper supply by virtue of market forces, thereby negating any need for the government to intervene and try to fill a void they argue is non-existent. The final and more general counter is that, perhaps the government shouldn’t be worrying so much about food carts and more about other “consequential” topics, whatever they may be.

There are probably a variety of other arguments that can be made here, but I think the general principle is simply: providing fruit stand permits to poor neighborhoods is not a role of government.

But, however black and white this issue may seem theoretically, I agree with speaker Quinn’s initiative on different grounds. In arguing for the creation and selling of permits that are specifically destined for an impoverished community, a new market that would not have existed is being created. Since most permits issued by New York City allow the holder to freely choose their location, most fruit and produce vendors migrate to wealthier areas of town where demand is the greatest. This natural gravitation by merchants is an outcrop of a hard reality: healthy food isn’t on the mind of the poor – and for good reason! Health food, organic food, specialty food, et cetera, is more costly, perishes faster, and is raw – thereby requiring more processing. Most poor people don’t have the luxury of considering these things, and are rather concerned with filling their own bellies and their children’s. Merchants of course, recognize this.

Since these permits are limited to impoverished neighborhoods, Speaker Quinn is attempting to artificially create a new market where one would probably (or at least for the near future) never come to be. The government isn’t forcing merchants to set up shop in impoverished neighborhoods, instead the government is encouraging it. If no opportunity exists, then the permits will just languish, and eventually the idea would be dropped all together. I think the forces of competition and creativity need a little push at times.

to the contrary, there is no guarantee that a few new fruit stands would be enough to change the eating habits and consequently, the health of the people in these neighborhoods. while the issue of languishing communities is itself much deeper (including the reason they’re perpetuated in the first place, the affects of welfare, etc…) than a bill allowing for fresh fruit stands addresses, i think Quinn’s bill is worth a try.

inspiration for the cause

Jessica Wright 

An article by one of my professors, Douglas B. Rasmussen, features a poem called “My Creed”,

I do not choose to be a common man.
It is my right to be uncommon- if I can.
I seek opportunity- not security.
I do not wish to be a kept citizen,
Humbled and dulled by having the state look after me.
I want to take the calculated risk,
To dream and to build, to fail and to succeed.
I refuse to barter incentive for a dole.
I prefer the challenges of life to the guaranteed existence,
The thrill of fulfillment to the stale calm of utopia.
I will not trade freedom for beneficence
Or my dignity for a handout.
I will never cower before any master
nor bend to any threat.
It is my heritage to stand erect, proud,
And unafraid, to think and act for myself,
Enjoy the benefits of my creations
And to face the world boldly and say, this I have done.
All this is what it means to be an American.

 While this is what I would like “American-ness” to be as well, and this is what I mean when I say proudly that I am an American, I have to agree with Rasmussen’s analysis:

I seriously doubt that this moral and cultural attitude is prevalent in the United States today… but certainly I think it was prevalent at some time in the past in the United States … as I consider the decline of liberty in the United States and what appears to be its moral and economic deterioration as well, I like to remember that a man from Lithuania gave me the poem called “My Creed”.  This reminds me that the ideals expressed in this poem are not the property of some people who inhabit a particular location, but are ideal for any and every human being.

The overwhelming political and cultural trends that sweep across the United States and Europe no longer emphasize these principles.  Instead of promoting thriving businesses that create wealth and thus stability, people are encouraged to pay more to the state so the state can provide.  But, as well all know, and in the words of F.A. Hayek,

The aim for which the successful entrepreneur wants to use his profits may well be to provide a hospital or an art gallery in his home town.  But quite apart from the question of what he wants to do with his profits after he has earned them, he is led to benefit more people by aiming at the largest gain than he could if he concentrated on the satisfaction of the needs of known persons.  He is led by the invisible hand of the market to bring the succor of modern conveniences to the poorest homes he does not event know (Law, Legislation and Liberty, Vol.2).