Q&A on "The Illusion of Free Markets" with Bernard Harcourt discussion

Topic #3: Paul Krugman, the Shock Doctrine, and the "Naturalization" of Free Market Outcomes.

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message 1: by Bernard E. (last edited Mar 03, 2011 04:43AM) (new)

Bernard E. Harcourt | 16 comments Mod
So we left the last discussion topic with the question: How does the idea of the free market "naturalize" distributional outcomes?

I think that Paul Krugman's recent editorial on Naomi Klein's Shock Doctrine in the New York Times here provides a fabulous illustration. In the editorial, Krugman talks about a provision in the Wisconsin bill that would quietly "let the governor privatize any or all of the [public utility] facilities at whim. Not only that, he could sell them, without taking bids, to anyone he chooses. And note that any such sale would, by definition, be 'considered to be in the public interest.'”

From a conventional Chicago School perspective, this provision would simply "unleash the natural forces of the free market," and allow privatization to produce more efficient results. But, and I think this should be obvious, the provision is nothing more than reregulation of a regulated space that gives the governor the exclusive ability to redistribute wealth freely.

What I argue in the book is that the idea of natural order and efficiency associated with the concept of the "free market" has come to naturalize the market itself and thereby hide the massive redistributions that take place there. It masks the state’s role and the extensive legal and regulatory framework that embeds all market transactions. And when we start to believe that the markets are operating on their own, we fail to pay sufficient attention and properly scrutinize how the administration of the markets actually redistributes wealth. The idea of natural order or, today, of market efficiency, I suggest, obfuscates from view the massive redistribution of wealth and resources that necessarily accompanies the inevitable organization of economic exchange.

message 2: by Pattie (new)

Pattie | 1 comments First of all, my thanks to Professor Harcourt for making himself available on this forum. I’m not an academic, so his presence here encouraged me to finish the book, which was clearly directed to an audience of trained economists. I’m more used to reading economics written for a general audience (authors such as Robert Reich, Paul Krug, Naomi Klien, etc) and my High Academic-ese is rusty.
I hate to admit any common ground with the WSJ review’s author, but had to agree that "The Myth Free Markets" spends a lot of time arguing two points that are givens for anyone with a grounding in economics sufficient to get them through the first chapter: 1) that markets aren't really free, and 2) that the US prison system has expanded inappropriately. The WSJ author and his readers, who, sadly, are among those most likely to be among the 29% who would understand the book, would likely agree with both statements, but then would answer 1) “hey, I’m rich so it’s worked out OK for me” and 2) “who cares?”

I would have appreciated a more extensive discussion on the link between the widespread acceptance of the “free” market and the expansion of the carceral state, and would especially have liked to see the implications set out for the reader. It’s relatively uncomplicated to show even the economically illiterate that markets aren’t really free, but may be more difficult to explain how this results in an invisible and massive redistribution of wealth and resources, and more importantly, what that means to the huge majority who have not benefitted from this redistribution.

I hope that Professor Harcourt will take these concepts and restate them in a format and forum more accessible to those outside academia, and help more of us understand their implications for our societies.

message 3: by Bernard E. (last edited Mar 31, 2011 08:49PM) (new)

Bernard E. Harcourt | 16 comments Mod
Thanks, Pattie, for getting to the heart of the matter! I really appreciate it! Let me make a couple of comments before I too get to the heart of the matter… (as quickly as possible).

First, while I agree that most reasonable people should know full well that free markets aren’t really free, the fact is that the opinion polls suggest that a vast majority of people believe that the “free market system” is the best economic system around. 71 percent of respondents in the United States agree with the statement: “The free enterprise system and free market economy is the best system on which to base the future of the world.” (This is from the Program on International Policy Attitudes (PIPA) at the University of Maryland). So I think that we have to deal with this puzzling fact: most people believe that even if “free” does not mean “completely, entirely unregulated,” most Americans embrace the free market.

So, to summarize this first point: though a lot of us realize that the free market is actually regulated, a majority of our fellow citizens believe that markets should be free and that the free market system is the best system in the world (essentially because government is incompetent).

Second, the link. Here, the place to begin is the paradoxical belief that the government is competent when it comes to policing and punishing (and external security as well, i.e. the military). I say it is “paradoxical” because it produces two very different views of the state: (1) an incompetent state that can’t manage the economy, but (2) a competent state that can manage crime and punishment.

This paradox is the link, in the sense that it is what makes us resist government intervention in economics, but embrace government intervention in the field of crime and punishment. It is what makes us less resistant to criminalizing all deviant behavior. It makes us less resistant to the massive prison expansion that we witnessed in this country.

The paradox is captured well in this quote by Ronald Reagan: “[T]his is precisely what we’re trying to do to the bloated Federal Government today: remove it from interfering in areas where it doesn’t belong, but at the same time strengthen its ability to perform its constitutional and legitimate functions…. In the area of public order and law enforcement, for example, we’re reversing a dangerous trend of the last decade. While crime was steadily increasing, the Federal commitment in terms of personnel was steadily shrinking…” Notice that the government is viewed as bloated and incompetent in the area of social programs and economic regulation; but legitimate and competent in the area of crime and punishment. This reduces our resistance to amassing prisoners and inflating our jails.

Now, to the heart of the matter: “Who cares?” Good question! Harsh, but good question! Perhaps you are right, Pattie, that some people will ask that question, but I am not sure the majority would. Who cares? Well, I think we can start with the 7 to 8 million plus Americans who are under correctional supervision (either in prison or jail, or under parole or probation) as well as the dozens of millions of family members and friends of theirs. Then I think we could expand to all of the people who are directly and indirectly affected by the social instability caused by removing so many from their commnities and families. And from them, I think we can then enlarge the picture to all the people who have a sense that the inequality being produced by our system of mass incarceration is unacceptable.

Frankly, I think we all should care given that we are all responsible for mass incarceration in this country. And that is really the heart of my intervention. What I try to do in my work is address the question “How did we let this happen? All of us, that is. What role have we all played?” I think it is too easy to point at specific instances of neoconservative law-and-order interventions (three-strikes, mandatory minimums, etc.) and blame neoconservatives. We need instead to probe how our commonly held beliefs about the state have made it so easy to criminalize and punish. We need to explore how our own set of beliefs and world views have contributed to mass incarceration. That is the intervention I am trying to make. That is really the heart of the matter.

message 4: by David (new)

David Kaib | 2 comments
the fact is that the opinion polls suggest that a vast majority of people believe that the “free market system” is the best economic system around. 71 percent of respondents in the United States agree with the statement: “The free enterprise system and free market economy is the best system on which to base the future of the world."

I wonder about this. Are people reacting to the idea of free enterprise or free markets, which aren't necessarily the same thing. Also, the way this is phrased suggests it may simply tapping views about the US system versus (imagined) alternatives. Is there other polling on this that sheds better light on this issue

message 5: by Ron (new)

Ron Moss (ronmoss) | 1 comments I think government and the market operate in two separate spheres, like Separation of Powers in government; the market is good at what it does, but bad at others. It does not create communities. Government is needed to regulate the market so it does not run rampant, just like we have the Senate to make sure democracy does not run rampant.

message 6: by Boat (new)

Boat | 2 comments "I think it is too easy to point at specific instances of neoconservative law-and-order interventions (three-strikes, mandatory minimums, etc.) and blame neoconservatives."

In this case Occam's Razor provides the simplest and best explanation. Neoconservatives are the problem. The other side of the coin is even simpler: Follow The Money! The lucrative Prison Industrial Complex is the piper that plays the tunes politicians of both political parties dance to. Ruth Gilmore detailed this problem in "The Golden Gulag".

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