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Freedom Is Natural

This is our Burning Libertarian Question (BLQ) of the day. There is a strange and overwhelming perception that we need governments to protect us from those evil evil free markets. Of course, this is only a gut feeling which contains no arguments of any nature. In order to fully understand this question we need to clarify the technical details and the arguments of the people presenting this question. To be fair, we understand why so many people don't get it. The main culprit is mainstream economics and its teachings, but we're getting ahead of ourselves. We will get to it.

THE ARGUMENT

As we will see down the road this argument it's a classic "straw man" argumentative method that is used to confuse people when everything else fails. Of course, from a philosophical perspective, this method is flawed. It simply consists of restating your opponent's arguments in such a manner as to purposely built in flaws that can later on be exploited. However, we do believe that many of the people making these arguments are honest people. It's just that they have been confused by the nonsense of mainstream economics. Let's get to it.

The argument begins by stating something that libertarians hold dear; this is that all agreements must be voluntary in nature. This much is correct. However, the argument continues by stating that a voluntary agreement is the best deal that you can possibly make. If this would not be the case you would not make the deal and wait for a better one. Within this context labor or to be more precise labor agreements or contracts are exactly the same. They are voluntary agreements between parties which benefit all actors. What this essentially means is that voluntary agreements are the best agreements that we can possibly have and therefore any interference from any other source (for example the government) will only hurt all the parties in the agreement. In this sense what governments do is to restrict the options that we have and therefore this is bad for us.

This part of the argument is the "straw man". Now that the flow has been introduced they can actually presents the argument which is:

According to them this point of view looks at the relationships between actors in an agreement as a series of independent deals when in reality every deal affects everybody else. Furthermore, this point of view assumes that the parties in the deal have specific properties such as "utility" or "demand" and furthermore the actors know what these properties are and their values. These are the values that drive their decisions. According to the argument, this is not always true and therefore it fails consistently.

THE COUNTER STRAW MAN

As we already stated in the beginning, there is a big problem with trying to deal with this kind of arguments because they originate in false points of view, points of view that are typically not libertarian. Let's take a closer look at them from an Austrian Economics point of view. Why Austrian Economics? Because Austrian Economics is the only economic theory that truly studies free markets in their natural environment. All other so-called economic theories deal with the so-called "correct way" of dealing with the free market. This is confusing because they rename "managed markets" as "free markets". For them pure free markets are dangerous and therefore they must be managed. As a consequence of this belief they cannot imagine having pure free markets under any circumstance. Consequently, any market that is managed by the government becomes a so-called "free market".

Now that we have clarified this point we can move on. Are voluntary agreements or contracts the best deals that we can possibly have? Not a chance. Austrian Economics it's very clear in this regard. Austrian Economics teaches us that all transactions, this is all contractual agreements, are subjective. We, this is, you and us and everybody else makes contractual decisions based on individual points of view which are affected by our brain, our feelings, our needs and anything else that you can possibly think about. Within this context it is absolutely impossible to state that any voluntary agreement is the best that we can possibly have. This is simply not true. Austrian Economics teaches us that we make deals based on our perception of reality on a specific time point. Interestingly enough it is mainstream economics that teaches that people contracting freely choose the best deal they can possibly have. How do we know this? Because mainstream economics treats the economy as a set of mathematical rules representing some sort of dynamic equilibrium where the process is always at the apex. As a matter of fact, Austrian Economics it's very clear when it states that our voluntary decisions in transactions or contracts can and very often are in error. Just because we believe that we have taken the best decision that doesn't mean by any stretch of the imagination that we have done so. To believe otherwise it's ridiculous and it goes against our daily experience. Just take a look at the mountain of people that make poor economic decisions every single day of their life.

The next false argument is that if people would not be taking the best decision they can possibly take, they will simply wait for the next one. This is again, not true. Austrian Economics it's very clear when it states the principle of Time Preference. People, everybody prefer whatever they may prefer now and not later. Again, this principle is very common in daily life. Just ask yourself when was the last time you wanted something but not now? Again, this argument is ridiculous.

The idea that labor contracts are actually contracts is correct. That's exactly what they are. They are no different in nature than going out and selling your used car or buying a pizza. They are contracts. As such and from a subjective point of view they do benefit both parties. They are indeed win-win arrangements. Now, having said that, it is clear that there is no guarantee that these arrangements are the best that those parties may have. However, they do benefit both parties. From this perspective, it is true that when governments interfere with this process they are removing options from the negotiating table without any right to do so. By removing options they are removing potential outcomes that could make labor arrangements even more beneficial for all parties. This much is also true.

THE COUNTER ARGUMENT

Now that we have clarified the issues with the straw man methodology, we can move on to analyze the actual arguments. The first problem is that according to them the relationships between actors, that would be contractual arrangements, are not sets of independent deals but actions that affect everybody. Strangely enough, this is actually correct and reinforces the libertarian cause.

Austrian Economics is very clear when it states that the free market is a self-correcting and distributed mass of independent deals which self optimizes and self organizes as it goes along. Austrian Economics emphasizes this point to a degree to be maddeningly redundant. Let's specify this again; the beauty of the free market is that the people acting in self-interest produce a result that benefits everybody. It is actually the process of independent people thinking independently that makes this possible. Yes, independent deals to affect everybody else, but in a free market this is actually for the best of everybody. On the other hand, mainstream economics teaches that to a large degree we cannot allow independent deals because they don't take into consideration the impact that these deals will have on everybody else. Mainstream economics assumes that there is some sort of overseer which is all knowledgeable and all-powerful that can see the impact that individual decisions will have on the rest of the people and will act accordingly to correct any future problems. Now let us ask you, who do you know that can actually do this? Do you actually believe that governments, those very same governments that have screwed up your life, the economy and ushered the age of world wars are capable of such wisdom? Of course this idea is ridiculous!

It is precisely because contractual arrangements between parties are independent that they are so robust and dynamic. It is precisely because people adapt quickly to changing circumstances that free markets can maintain themselves optimized. Now let's be clear, we're not saying that free markets are the absolute best economic conditions that we can possibly have barring none; this is most certainly not true. What we are saying is that giving the current human condition this is the best that we can possibly have and as this condition changes a new economic theory will push optimum economic processes beyond what free markets can optimize. But for now, this is IT!

The argument further states that actors have specific properties such as "utility" or "demand" and that these properties drive their decisions. This is of course true but in a subjective way. It is interesting to point out that it is actually mainstream economics that treats these properties as something objective and therefore mathematically definable. This could not be further from what Austrian Economics teaches us. Yes, Austrian Economics tells us that there is such a thing as utility and demand but that those properties are purely subjective and they change from person to person and from time to time. And yes Austrian Economics tells us that those properties are part of a vast array of information that we use to make decisions. Furthermore, we always take into consideration those properties and as such success or failure is not dependent upon their presence or absence. To believe otherwise is to believe that when we interact with other people we behave like human calculators computing these and other properties all the time. This is of course ridiculous!

As we explained at the very beginning the fallacy in these types of arguments is that they confuse mainstream economics with Austrian Economics. Often times this confusion arises from the very education that these people have received from governments which, not surprisingly, are biased towards mainstream economics because this allows them to continue and maintain the illusion that we actually need a government. Of course, under this set of circumstances it should not be surprising that people misunderstand libertarianism because they're trying to analyze the free market (which is a consequence of libertarianism) using theories and tools that have proven time and time again to be deeply flawed and downright dangerous.

CONCLUSION

Markets are not antisocial. What is antisocial is the very idea that free markets need to be managed in order to make them social. Free markets are the very expression of people and as such the very expression of what politicians call "society". It is preposterous to declare that something that comes freely from the people needs to be managed by an organization that do not respond to the will of the people in order to make these actions of benefit to the people. Markets are not antisocial. What is antisocial is the concept that people needs oversight from a supreme authority which has no oversight. It is this authority that assigns itself the right to determine what markets can or cannot do even though has a track record of disasters after disasters after disasters which in modern times has lasted more than 200 years and counting. Free markets are not antisocial, free markets are the very expression of the people, for the people and by the people. Truly.

Note: please see the Glossary if you are unfamiliar with certain words.

 

 

 

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