Capitalism: Free Market Myths

I was listening to the Freakonomics podcast a while back and they had a Harvard economist on talking about how cities are so much more sustainable than any other means of organizing people.  I have many things to say about cities, but I'll start out with a critique of his economics theories.  I have a hard time listening to hardcore market economists and their optimism about the potential of the free market given the world of examples of how it has utterly failed us, the biggest being that we are racing towards a great wall of eco-doom, and still not even taking a glance ahead. 

At one point, this economist criticized public school systems in cities, which are easy targets for critics. As market economists are wont to do, he proposed that the free market could do much better. He gave the example of restaurants to describe the flaws in how public school systems are set up. He said you wouldn't want the government to set up one restaurant and require all the people to eat there because it would taste bad and there would be no incentive to make the food better. So why would you want to set up an educational system like that? He said restaurants have to compete in the marketplace, so they have to do better than the one down the block or they will go out of business.

I was a little amazed that somehow he could draw a connection between these two very different economic sectors. For one thing, one is a luxury market that meets a finite need, the other is a program that continues throughout your childhood and teaches you information that prepares you to function better in society as an adult. You buy dinner and you get something that lasts you one meal. You aren't buying food service for the rest of your life. You aren't buying a nourishment plan that provides the most healthful food for you on a continuous basis. That kind of long term health strategy would compare better to an educational system.  

The Road to Serfdom

If you haven't heard of it, The Road to Serfdom is an essay by economist Friedrich A. Hayek and it was first published in 1944. It is Hayek's warning against the potential of centrally planned economies to be easily taken over by dictators and oligarchies.  Hayek felt that the free market could do a much better job in shaping society for the best than any government.  He is often thought of as a sort of nemesis of the economist John Maynard Keynes, whose theories were based in using government to influence and direct the economy. It's been a long road for me to understanding how this essay has been used by the Right as propaganda to influence public opinion about the Obama administration's handling of the economic crisis of recent years.

A couple years ago, I heard an irate teenager in the diner of the conservative bible belt town where I live “educating” a few elderly women about what was being perpetrated by the Obama administration. I listened in with astonishment as the boy told these women, who had been alive since before WWII, about how the world worked. He said that Obama was a socialist and that socialism was one step away from dictatorship. The elderly women listened politely, but though they were probably conservative too, seemed to look with knowing pity on the kid. They probably weren't as politically minded as he was, but a lifetime of experience had made them wise enough to be skeptical. I didn't understand where the kid's logic was coming from, but he sounded like someone who had just been made aware of some great “truth” by an idol, and by the ignorance of the kid's claims, I figured it had to have been a conservative pundit, likely someone like Glenn Beck.

Months later I was listening to a Planet Money podcast where Hayek was compared to Keynes in light of the battle going on in Washington about how to best go about solving the country's economic problems. They mentioned The Road to Serfdom, so wanting to better understand the views of Hayek, I looked up the essay and read it. What I was immediately struck by was how dated it was. It was obviously written at the height of the Nazi regime and would have served well as anti-Nazi propaganda, but was likely meant to be something different. Democratic countries with leanings towards socialist policies,in other words, countries that had government control of certain sectors of the economy, were compared and likened to the Nazi regime. He predicted that these governments were only steps away from authoritarian regimes like the Nazis. The reason the essay seems dated to me is that history has shown his predictions to be wrong.