Myths About Markets

There are approximately twenty million myths about markets and market capitalism, one of the most common being this:

Markets don’t work well (or are inefficient) when there are negative or positive “externalities.”

Here’s how Tom Palmer, philosopher and economist, bunks that canard:

The mere existence of an externality is no argument for having the state take over some activity or displace private choices. Fashionable clothes and good grooming generate plenty of positive externalities, as others admire those who are well clothed or groomed, but that’s no reason to turn choice of or provision of clothing and grooming over to the state. Gardening, architecture, and many other activities generate positive externalities on others, but people undertake to beautify their gardens and their building just the same. In all those cases, the benefits to the producers alone — including the approbations of those on whom the positive externalities are showered — are sufficient to induce them to produce the goods. In other cases, such as the provision of television and radio broadcasts, the public good is “tied” to the provision of other goods, such as advertising for firms….

More commonly, however, it is the existence of NEGATIVE externalities that leads people to question the efficacy or justice of market mechanisms. Pollution is the most commonly cited example. If a producer can produce products profitably because he or she imposes the costs of production on others who have not consented to be a part of the production process, say, by throwing huge amounts of smoke into the air or chemicals into a river, he will probably do so. Those who breathe the air or drink the toxic water will bear the costs of producing the product, while the producer will get the benefits from the sale of the product. The problem in such cases, however, is not that markets have failed, but that they are absent. Markets rest on private property and cannot function when property rights are not defined or enforced. Cases of pollution are precisely cases not of market failure but of government failure to define and defend the property rights of others, such as those who breathe polluted air, or drink polluted water (source).

Under true laissez-faire capitalism, in other words, which is the only system that fully protects property and person — thereby forbidding the instigation of force in any form — you are not allowed to poison anyone.

In a socialistic, protectionist society, such as the one we now live in, no such rule of law exists because property is not regarded as private but communal.

The proof is ultimately in the water.

16 Comments

  • Capitalist

    April 1, 2010

    Ray, I must humbly dispute the assertion that property is not regarded as private. While progressives certainly oppose you or I having property, just try and deprive them of theirs and find out if they believe in private property or not.

    This is but one double standard of these hypocrites. Remember Rosie O’Donnell wanting to disarm us, while defending her need for armed bodyguards. Observe our vaunted leaders’ magnanimous health care “reform”, from which they exempt themselves. Note how they need only accuse us of a prejudice to engage in vitriolic discrimination. Amaze at the audacity to cheat the tax laws they write.

    And why all the deception? So they can have lavish life styles, great abundance, and private estates.

    What is elusive is the definition of “the rich”. It is not what you have now that makes you rich in their eyes, it is the potential that you could become wealthy if and when you earn an income that lifts you above survival. That is what they cannot tolerate: you or I having the opportunity to grow rich through high income.

    Finally, aren’t many of the current government takeovers closer to fascism than socialism?

  • Ray

    April 1, 2010

    Fascism and socialism aren’t opposed, despite what the left and the right would have you believe.

    The lexical definition of fascism is “a governmental system with strong centralized power that controls all public affairs, including industrial and commercial…”

    The lexical (and economic) definition of socialism is “government control over the means of production…”

    These two systems amount to the exact same thing in the end: an elite bureau of centralized “planners” telling the rest of us how we must live and how we must spend our own money. Accordingly, they result in the legal imposition of force, which is the diametric opposite of freedom. It’s all a species of the genus authoritarianism.

    There’s only one alternative: laissez-nous faire

  • Capitalist

    April 1, 2010

    Hmm… and what was it Biden said (March 18, 2010): “We’re going to control the insurance companies.”

    It’s hard to argue with your assertion, Ray. It simply appears socialists are more economical in their use of language.

  • BedazzledCrone

    April 2, 2010

    What does NDSAP (party name in German for NAZI) stand for? National Democratic Socialist Workers Party

  • Redmond

    April 3, 2010

    Hi Capitalist.

    I have been reading some of your comments on this site, and I think they are great.

    You say.

    Finally, aren’t many of the current government takeovers closer to fascism than socialism?

    I agree with Ray on this point – I think you are splitting hairs – Mussolini said the following:

    The Fascist conception of the State is all-embracing; outside of it no human or spiritual values can exist, much less have value. Thus understood, Fascism is totalitarian, and the Fascist State–a synthesis and a unit inclusive of all values–interprets, develops, and potentiates the whole life of a people. (p. 14)

    You really need to look at this in terms of collectivism VS. Individualism in my opinion.

    Have you read this? “What is American Corporatism?”

    http://97.74.65.51/readArticle.aspx?ARTID=22594

    Very enlightening.

  • Capitalist

    April 4, 2010

    Thanks for your kind words, Redmond. Your point of collectivism vs. individualism is another way of looking at the great divide. It is so easy to make collectivism seem the high road in theory, but in practice it is insidious. Ever notice those who foist it on us always exempt themselves? Individualism is weaker in the sense that its supporters don’t tend to run in packs, and it is harder for the weak-minded (who have been indoctrinated in the collective way) to understand how it works.

    I wish I had more time to indulge in this stuff. I have a day job that is very demanding, and very rewarding for the corporate political types that get first shot at the profits. While I think the profit distribution unfair, I’m stuck until I can create my own escape. That’s where I spend a lot of my time: creating a product that I own and can sell, and I won’t need three corporate vice presidents (with several layers of upper and middle management) telling me what to do.

    Virtually everyone I know is demoralized, pessimistic, and cynical. In my opinion, this is the result of political elites getting their way across the globe, in our nation’s capital, in our state capitals, and in our corporations. We forgot that it is the producer we can’t do without, and in its place we have layer on layer of egotistical self-anointed rulers that can produce nothing, but have seized control and enslaved us.

    In spite of all the collectivism, socialism, corruption, corporate political insanity, and complexity of our modern markets and products, I have found something I can do and still find success like in the fabled “two guys in a garage”. I only mention this for two reasons: to encourage others to seek their own accomplishment and independence (e.g. Ray writes books), and to suggest there is still hope that any of us can rise above the tripe of worthless politicians and find individual success. In the end, I don’t espouse individualism, I live by it.

    Before the collective smears me as an uncaring and selfish individual, let it be known I work well with others, and love helping those who really need it, and those who seek to help themselves. Like Dennis Miller says, though, I couldn’t care less about the clueless, and have no problem if they fall through the cracks. E.g., I have some clueless in-law relatives that afford the latest cell phones, computer games, fancy wheels on their cars, etc. but don’t insure their cars, always take their income under the table, don’t buy medical insurance, and count on the government or hospitals to provide when their reckless lifestyle catches up with them.

  • Redmond

    April 4, 2010

    Hello Capitalist

    Ever notice those who foist it on us always exempt themselves?

    Always.

    Individualism is weaker in the sense that its supporters don’t tend to run in packs, and it is harder for the weak-minded (who have been indoctrinated in the collective way) to understand how it works.

    I guess it depends on what you mean by weak-minded – most people I have met want more opportunities for themselves, and for their children, if they have them, regardless of their level of education. As well, most want to be “Left Alone” as Ray would put it – once you start explaining why socialism is actually making their lives harder, you’ll find they can open their eyes.

    I wish I had more time to indulge in this stuff. I have a day job that is very demanding, and very rewarding for the corporate political types that get first shot at the profits.

    Tell me about it, I have two small children and a full time job – I am very lucky that I have an incredibly short commute, so I wake at 5 am to read and write… I work in High-end architectural design and construction, what do you do? By the way, you can email me at fpwuat@gmail.com if you would like to chat.

    While I think the profit distribution unfair, I’m stuck until I can create my own escape

    What is unfair about it? I would be interested in hearing about it.

    That’s where I spend a lot of my time: creating a product that I own and can sell, and I won’t need three corporate vice presidents (with several layers of upper and middle management) telling me what to do.

    Being your own boss can be incredibly stressful – you often work far longer hours than for another – but I love tinkering, I would be interested to hear about your endeavors.

    Virtually everyone I know is demoralized, pessimistic, and cynical.

    You need new friends. I recommend drinking buddies.

    we have layer on layer of egotistical self-anointed rulers that can produce nothing, but have seized control and enslaved us.

    Agreed – Ron Paul for President!

    I have found something I can do and still find success like in the fabled “two guys in a garage”… In the end, I don’t espouse individualism, I live by it.

    You should try espousing it! I have become very vocal as of late, and talk about individual rights and Laissez-Faire all the time, one of the best feelings is opening peoples eyes to the possibilities – being a teacher of sorts. You seem intelligent and well spoken, you would be a great advocate!

    Before the collective smears me as an uncaring and selfish individual,

    The collective doesn’t exist – only individuals – so don’t even think about that one.

    Like Dennis Miller says, though, I couldn’t care less about the clueless, and have no problem if they fall through the cracks.

    I used to love Dennis Miller – I am more into Alex Jones these days. DM seems like a bit of an ideologue from what I have heard him say recently.

    E.g., I have some clueless in-law relatives that afford the latest cell phones, computer games, fancy wheels on their cars, etc.

    Aren’t you trying to create a product to sell? Sounds like you are being anti-consumerist here…

    but don’t insure their cars, always take their income under the table, don’t buy medical insurance, and count on the government or hospitals to provide when their reckless lifestyle catches up with them.

    I don’t like paying taxes – do you?
    What is catching up with them? Eating, drinking, smoking? Are they on Medicare? Or do they cover their own medical bills?
    Anyways, if you would be interested in continuing this conversation via email, I would be interested.
    Or we could just take up more of Ray’s website – Speech is free on the internet after all.
    As well, I have a few blogs, and would be interested in what you think of them!
    Best regards.
    Redmond

  • BedazzledCrone

    April 4, 2010

    Redmond: “Agreed – Ron Paul for President!”

    Does this mean that if someone espouses “individualism”, it doesn’t matter what any of his other values/positions are? Has anyone ever looked at what the world would look like under a Ron Paul presidency? Robert Heinlein had that scenario in a book I think that I already mentioned (Job: A Comedy of Justice). What would the world look like if Ron Paul gets the support of the Christian Coalition, which it certainly looks like he would.

    Wouldn’t the fact that he has a 88 rating, which means support for Christian Coalition positions (http://www.cc.org/files/3/2008_Scorecard_8_5x11.pdf) give you pause – unless of course, the agenda of the Christian Right is one that you support. Of course, he doesn’t vote their way in everything (18% negative). And the world of the religious right is just what Robert Heinlein describes in Job: A Comedy of Justice.

    Looking at some of Paul’s voting record on what I would consider should be Libertarian positions, it doesn’t look very Libertarian to me – at least not as I understand it. Now I have to admit that there are many on the Von Mises website who manage to integrate Libertarian and Religious Right positions. However, Von Mises and Rothbard are probably rolling over and over and over and over in their graves! And the Goddess of the Market must be shaking her head in absolute amazement from the other side.

  • Capitalist

    April 5, 2010

    “What is unfair about it? I would be interested in hearing about it.”
    It’s a long story, but suffice it to say we are very top-heavy. We started as an innovative company composed mainly of producers, now we are a technocracy loaded down with good ol’ boys with big offices, salaries, perks, and very unclear what they actually do for the bottom line.

    “You need new friends. I recommend drinking buddies.”
    Our jobs are being exported. Not because it’s the right thing to do, but because of political agenda. Good advice, though, maybe we’ll have one some time.

    “You should try espousing it…”
    Again, you are too kind. I will when the time comes, but not here, and in no way connected to my political beliefs. Being conservative can be deadly; look what happens to people like Palin, or an actor in Hollywood that espouses freedom and conservative views. Actually, one of the beauties of what I’m doing is that it has built-in free advertising.

    “Sounds like you are being anti-consumerist here…”
    My point is this: we now have a law that redistributes wealth in the guise of providing health care for all. Some people choose not to provide for themselves, and will qualify for the handout because they hide their income; they could afford it themselves if they spent less money on luxuries. What caught up with one of them was an auto accident that cost taxpayers large sums of money.
    Look, I don’t care if people want to behave irresponsibly, I’m just tired of politicians holding them up as sob stories, and neglecting to mention they can afford luxuries. All that tells me is they really aren’t truly needy, so why should you and I be forced to cover their essentials? Of course, I know the answer. The politicians seek totalitarian control, and are simply using the uninsured (at the moment) as an excuse.

    “I don’t like paying taxes – do you?”
    Hell no, but I also don’t expect the government to provide for me. I guess I’m whining; if we play by the rules, we are heavily punished (taxed), too often for the sake and benefit of those who cheat.

    Finally, about Ron Paul. There are things I like about him, but he’s made some statements about our role in the world I wasn’t particularly fond of at the time, though I don’t remember what they were now. He’s sure be a lot better than what we have now!

  • Redmond

    April 6, 2010

    Hi Bedazzled Crone

    Does this mean that if someone espouses “individualism”, it doesn’t matter what any of his other values/positions are?

    Well, if he is in favour of people doing what they want, and not acting in a coercive way to force others to act in ways that they think is correct, then yes.
    Under the US Constitution, you are free to worship any God, or none at all.
    As for his views on abortion– I am guessing that is what you are referring to, the classic litmus test – I have no idea what they are.

    Has anyone ever looked at what the world would look like under a Ron Paul presidency? What would the world look like if Ron Paul gets the support of the Christian Coalition, which it certainly looks like he would.

    I just got his book, “the Revolution” so after I finish it, I will tell you what he thinks his “America” would look like – I don’t know what others think it would be like.
    But I have heard him speak about what is the proper role for the President according to the US Constitution, and it sounds like he wouldn’t do much.
    He certainly wouldn’t launch illegal wars, and would probably get rid of the CIA – He would have to watch his back if he ever got the nomination.
    As for the Christian Coalition, I don’t think it matters that much. If Ron Paul truly is a constitutionialist, then he believes that the state has no business in religion, and vice versa.
    http://rayharvey.org/index.php/2009/12/godless-constitution/

    Wouldn’t the fact that he has a 88 rating, which means support for Christian Coalition positions (http://www.cc.org/files/3/2008_Scorecard_8_5×11.pdf) give you pause – unless of course, the agenda of the Christian Right is one that you support.

    No it doesn’t. I would probably give him an 88 rating as well, maybe even 100.
    I am an atheist.
    What do you think the Christian Coalition thinks of me? Does it matter?
    By the way, your link isn’t working.
    But maybe you should look at the specific bills that he supported, and that the Christian Coalition supports, and then go from there.
    Here is one of them
    —Congressman Walter Jones Introduces Legislation Which Will Ensure that ALL Military Chaplains Have Religious Freedom. Congressman Ron Paul is the First Original Co-Sponsor—
    I don’t have a problem with that. Do you?
    Maybe you support the Christian Coalition’s Vision of America.

    Of course, he doesn’t vote their way in everything (18% negative). And the world of the religious right is just what Robert Heinlein describes in Job: A Comedy of Justice.

    Do you think Heinlein even knew who Ron Paul was? Would there be a place for a Constitutionialist in that fictional world? Probably not.

    Looking at some of Paul’s voting record on what I would consider should be Libertarian positions, it doesn’t look very Libertarian to me – at least not as I understand it.

    Can you send me the link? I would be interested in reading up on his voting record – since I claim to support him for President. Not that I can vote in America.
    Maybe point out some of the bills that you have a problem with. Of course since he is about the only libertarian congressman, and he does believe in participatory democracy, it would be hypocritical of him to not vote.
    You should look at the bills that he has personally put forward, or that he has co-sponsored, that would give you a better idea of his true views.
    For instance he put in an amendment to a finance bill that would Audit the Federal Reserve.
    What do you think the Christian Coalition’s view is on that one?

    Now I have to admit that there are many on the Von Mises website who manage to integrate Libertarian and Religious Right positions.

    Send me some of the links – I would be interested in reading them.

    However, Von Mises and Rothbard are probably rolling over and over and over and over in their graves!

    Why?

    And the Goddess of the Market must be shaking her head in absolute amazement from the other side.

    Who is the Goddess of the Market? I would like to met her.
    Is it her “invisible hand” that Adam Smith is talking about?
    Is only her hand invisible?
    Or can you see the rest of her?
    All very important questions.
    Maybe we can see what Von Mises wrote about her – I heard they had quote the love affair.

  • Redmond

    April 6, 2010

    Hi Capitalist.

    It’s a long story, but suffice it to say we are very top-heavy. We started as an innovative company composed mainly of producers, now we are a technocracy loaded down with good ol’ boys with big offices, salaries, perks, and very unclear what they actually do for the bottom line.

    You should quit. Find some place where you would be more appreciated. Email me the long story if you like. fpwuat@gmail.com I’ll read it on the weekend.

    Our jobs are being exported. Not because it’s the right thing to do, but because of political agenda.

    The jobs at your company? Or America’s jobs in general? The exporting you are talking about has been supported by Democrats and Republicans… Of course you are also importing some very cheap goods from China to offset the loss in spending power of the average American consumer.
    Always look on the bright side!

    Good advice, though, maybe we’ll have one some time.

    I live in Toronto, Canada – how far a drive are you? And yes – In Vino Veritas as they say.

    Being conservative can be deadly; look what happens to people like Palin, or an actor in Hollywood that espouses freedom and conservative views.

    Palin is a mental midget. She is a figurehead and nothing more. A celebrity politician. I would seriously fear for the safety of the world if she was ever given any real power.
    As for actors in Hollywood, they made their bed, they can lie in it.
    I don’t have much sympathy for any of them – left or right.
    You might find being outspoken brings you more friends than enemies – I have met quite a lot of very nice people who support what I am doing.
    Even the ones who disagree with me respect that I am being politically active(at least some of them do.)

    Actually, one of the beauties of what I’m doing is that it has built-in free advertising.

    What is that exactly? That you are doing that is.

    My point is this: we now have a law that redistributes wealth in the guise of providing health care for all. Some people choose not to provide for themselves, and will qualify for the handout because they hide their income; they could afford it themselves if they spent less money on luxuries. What caught up with one of them was an auto accident that cost taxpayers large sums of money.

    Actually I was referring to E.g., I have some clueless in-law relatives that afford the latest cell phones, computer games, fancy wheels on their cars, etc. , but otherwise I agree with you.
    The Banker Bailout was initiated by Bush, don’t ever forget that.

    Hell no, but I also don’t expect the government to provide for me. I guess I’m whining; if we play by the rules, we are heavily punished (taxed), too often for the sake and benefit of those who cheat.

    I agree, you are – your relatives don’t pay taxes and live off the system.
    Maybe you should turn them in to the IRS. Get back some of the money that you paid to support them.
    Of course you could also join a campaign to oppose entitlements.

    He’s sure be a lot better than what we have now!

    Agreed – Ron Paul for President.

  • Capitalist

    April 6, 2010

    “You should quit.”
    Agreed, but I have a very unique situation, which, again, I’ll not air here. Trust me when I say that moving from one boss to another could improve some things, while taking setbacks in others. Hence, the goal to break away once and for all.

    “The jobs at your company? Or America’s jobs in general?”
    Well, yes, but I cannot assess or judge what is happening at the national level. Some of my tool vendors give me insights into the broader market exposing a general trend, but I don’t have enough info to be sure what’s happening in general. When I say “political agenda”, I don’t mean Democrats or Republicans, I mean there are international tribal interests that place filling jobs in their home countries over keeping Americans employed.

    Here’s how it works. A person intent on employing his tribe “back home” attains executive power in the corporation. At first, the company establishes a resource base overseas based on the rationale they can’t find enough qualified people in the U.S. to get the job done. Next thing you know, there are no open positions here (they don’t even try), while many are hired overseas. Then the tenured people here are told to transfer their workload overseas, and assume a “support role”. The people that used to be innovators instrumental to creating markets are forced to guide people of far less knowledge and skill. Many of them, like you say “should quit” and have, for this is not the profession they invested so much time, money, and education in.

    I remember the left diminishing Reagan as a mental midget as well. I disagree with you there, having read Palin’s side of the story. Remember, good leaders stay abstract and surround themselves with genuine experts. And, Palin’s abstract is self-reliance, the Constitution, and American exceptionalism. I don’t think that makes her a mental midget.

    Turn in relatives: classic!
    Liberalism, progressivism, socialism, Marxism, fascism, you name it. Government control, out of control spending, and excessive taxes are our enemy, under whatever label we choose or are allowed to use. Yep, virtually all Democrats embrace totalitarian control, but Republicans have also lost their way. What do the slandered say, “Taxed Enough Already!”

  • Redmond

    April 6, 2010

    Unfortunately Reagan was a total interventionist. Whether these were his decisions, or those of the “Experts” around him, we will never know.

    As for defending the Constitution, have you heard of Iran-Contra? And the CIA smuggling Cocaine into the US?

    Have you read this piece by Ray yet?

    http://rayharvey.org/index.php/2009/12/ronald-reagan-and-the-myth-of-deregulation/

    Until Palin can form complete, logical sentences, without a teleprompter, and answer any question put to her in a rational and confident way, I will continue to suspect her ability to make informed choices and have a modicum of skepticism for the “Experts” she surrounds herself with.

    She is too eager to become the spokeswoman for the movement – When she stops speaking in soundbites and writes about her positions on issues without the help of a ghostwriter, I might begin to believe that she has actually read the US Constitution, and would actually respect the words within it.

    I wonder what she makes of the PATRIOT act.

    Probably thinks it is necessary to torture – time to get tough with Al Queda!!!

    Otherwise she is part of the problem, not the solution.

    You might want to look into the way she increased the entitlements to the citizens of Alaska and their Permanent Fund Dividend.

    Regards

    Redmond

  • Capitalist

    April 7, 2010

    Yes, I read Ray’s treatise on Reagan. Isn’t it irritating that the best example of a politician trying to block the tide of government overreach has to compromise with the devils to accomplish anything?

    Palin wrote her book, not a ghost writer. Don’t trust anything in the media WRT Palin; they are ideological political hacks, not journalists. Many liars lying does not make truth.

    Remember that the left has long placed their ideological agenda above what’s right for the country; witness the last year, where they have proven their willingness to ignore (indeed demonize) huge protests and pass “fundamental transformation” on party-line corrupt processes and votes.

    “Torturing” people who murder innocent civilians and cut peoples heads off is ok by me. Note that enemy combatants now get greater rights than our military people, who are governed by the UCMJ.

    Palin tells a story about benefits to gay partners in Alaska. The Alaska supreme court ruled they were constitutional. The legislature passed a law to take them away. Palin vetoed the law, stating she personally does not think they should be allowed, but that they had already been ruled constitutional, so her veto was for the express purpose of upholding the Constitution.

    The “entitlements” she “increased” is another deception that is misstated. I suggest you read her side of the story before adopting the myths designed to denigrate her at any cost.

    Remember Palin has been under unrelenting assault from day one of her emergence on the national scene. If she’s such an idiot, why is the left so afraid of her?

  • ScummyD

    November 6, 2010

    I enjoy using your blog as a reference when battling the Statists in my family.

  • Ray

    November 7, 2010

    Thank you, ScummyD. I think that’s the best thing I’ve heard all week.

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