Basic Economics, Chapter 18, Prologue Part 2

There was one other point I forgot to make in my last post, that of the importance of maintaining an objective, scientific, and value-free analysis. There is temptation to bring ethics and morality into the discussion, because it can make it easier to argue for the free market filling all the roles government now fills. By way of example, it is easy and persuasive to many, to argue that theft is wrong, and that taxation is theft; therefore, the state should be abolished. But, there are far too many people who don’t take issue with a little injustice as long as it doesn’t get out of control. Therefore, I cannot rely on a common understanding of what is ethical or moral to make a case for the free market as it doesn’t exist. Additionally, the argument for a free market in the fields of justice and defense hasn’t yet been settled scientifically. For instance, Jason Stapleton has made some good arguments against free markets in justice and defense. He points out that the free market may not always produce the desired results of a community that respects life and property rights so the day-to-day business of production and trade can carry on unmolested under stable conditions. Stapleton gives good examples of what could go wrong and paints the picture of a world I definitely don’t want to live in.

I don’t hesitate to concede that a completely free market society under the worst possible conditions is less desirable than a generally well-functioning society that has a night watchman state. On the other hand, having a state poses its own risks and its own problems. One cannot assume that just having a state will lead to the best possible outcomes for its citizens. Case in point, in the 1850s, Germany wasn’t even a nation state in the way we understand it today. The government was limited, and people were mostly free. It was not perfect, but there were no injustices so great as to cause a mild-mannered economist to advocate for the abolition of the state. Then, over the course of the next 100 years, the German state grew both geographically and in influence and power, a world war was fought, hyperinflation followed, fascism took over, and millions of people were rounded up and systematically murdered during a second world war that saw the utter destruction of major population centers throughout Europe. When all of that was over, the iron fist of socialism laid hold of the German people for another 40 years.

A fair question to ask is how many thousands of years would pass in a free market society, even under the worst conditions, before the death toll, cost of property lost, pain, suffering, and injustices all equaled what came to pass in those 100 years under the German state?

Certainly, given the example of Germany, any advocate of the state should admit it is preferable to live in the worst conditions of a stateless society than in the worst conditions of a state. I say this to try to spark an interest in the question and to encourage people to postpone judgement and consider the question without bias, as economists, as scientists.

Sowell writes that virtually everyone can agree on a few limited functions of government; Stapleton says it’s useless to debate the matter. Sowell is clearly right, because the majority of people in the world cannot imagine life without the state. Because of this, Stapleton may have a point that it is futile to try and convince people otherwise. However, economics, like any other science, is not dependent upon the consensus of the masses, nor is its study a waste of time.

As far as what’s possible and what seems possible, if you were to go back 500 years to any place in the Christian world and propose the notion of separation of church and state, you would be looked at like a madman. From Santo Domingo to the Scottish Highlands to the Balkans to London, it was taken as fact that religion was a department of the State. Not precisely the same way that the USDA is a department of our government today, true, but a portion of the taxes collected by kings went to fund the church. And there was, as far as I am aware, not a single man who thought that it should or could be otherwise. Had you been foolish enough to raise questions regarding the possibility that religion should be privatized and left to the free market, the response would have been that priests would starve and church buildings would fall into disrepair. Given the obvious facts regarding organized religion today, and the attitudes of people 500 years ago, it seems a reasonable analogy to the issue of whether we need a state operated monopoly in the areas of justice and security, which we will be grappling with here as we study Chapter 18 of Sowell’s Basic Economics. Perhaps in another 500 years there will be no state, and the people living in the Free Market Society of North America will look back with bewilderment at the injustices, wars, and destruction that plagued us in our time the same way we look back at the crusades and the backwardness of state run churches.

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