The social science of economics became distinct when several French intellectuals and Scottish moral philosopher Adam Smith isolated the field for special study.
For a long time thereafter certain assumptions underpinned the discipline, mostly about human behavior. These assumptions arose from the work of English philosopher Thomas Hobbes, who believed that all people are motivated to act so as to seek power over their environment.
Even the contemporary idea that everyone is a profit or utility maximizer derives from this basic notion. The goal of prosperity is quite normal for most people.
Of course, there are now different schools of economics and they each have modified the assumption somewhat, but the basic idea is still prominent: People have an innate drive to seek wealth or some other form of satisfaction.
The role of law is merely to make sure these market agents do not intrude on each other by theft, robbery and other violations of people’s rights. It is all a bit like a marathon race — everyone will move forward provided they aren’t permitted to trip each other.
The race in the marketplace, however, is endless. If something stops or interrupts it, the overall economy is going to suffer. So many economists who support free markets dislike government intervention, think it mostly means trouble, rarely helps.
But there are a whole lot of other type of economists — those who have been influenced by Karl Marx or John Maynard Keynes. These tend to believe in a decisive role of government in economic affairs. They think the unregulated, free market is cruel, ruthless and destructive of many human values. So they favor regulating market agents even if those agents haven’t harmed anyone.
In today’s fiasco there is a lot consternation about whether the free or the regulated market produced the mess. But there has not been a free market in place anywhere for many decades. Politicians always took it for granted that they may manipulate the market and regiment market agents.
Many examples could be listed, but the main point is that no free market has ever existed, not under Lincoln, nor Wilson, nor Hoover, certainly not FDR, or Eisenhower, Reagan or Bush. And it isn’t likely to exist under Barack Obama.
When politicians and bureaucrats intrude on the work of market agents they cause serious distortions, but market agents will most often adjust to these and try to profit from them. And this leads to even greater distortions.
Many market agents do not bother supporting a fully free market but simply work with the regulated market in which they find themselves. Because this does involve serious distortions on how a genuine free market is supposed to operate, their behavior will often come off as excessively greedy, oblivious to principles of proper market conduct. They tend to go with the flow, for example, by aligning themselves with various political interests.
One thing is certain. The idea the mess we now face was produced by the free market is preposterous.
Tibor Machan advises Freedom Communications, parent company of this newspaper. E-mail him at: TMachan@link.freedom.com