[This piece ran as a newspaper op/ed in early June, 2023]
The market is a marvelous device, as I learned “at the knee” of my father, who was a Professor of Economics. I got taught how the market makes these marvelous calculations, finding price levels based on the costs and benefits of all the buyers and sellers, and allocating resources to maximize “the wealth of nations.”
I grew up understanding that there is significant truth to the famous idea from the founder of Capitalist Ideology, that the various actors, acting for selfish reasons, are led as if by “an invisible hand” to produce an optimal outcome. (Or at least optimal in some ways.)
But it also turns out that there are hugely important things that “invisible hand” fails to grasp. It turns out that this market – where buyers and sellers meet to trade in ways that are mutually advantageous – is operating on dangerously incomplete information.
- It sees with exquisite fineness the costs to producers and the desires of consumers.
- But it is blind to those dimensions of our world that we participate in as interconnected parts of Wholes, – a society, a polity, a culture, an environment.
The market deserves our great respect. We can infer its great virtues from the fact that virtually all of the most decent and prosperous nations on the planet make considerable use of the market economy.
But neither is it a coincidence that all of those thriving and free societies also make considerable use of the political system to regulate and channel the market system. They’ve all recognized that
- Society will be damaged by an unfettered market, which is blind to some of the important values at stake in economic activity.
- And therefore — unless its blind spots are corrected – the market inevitably drives a society in directions that are dictated by the logic of the system, not chosen by the people, and that are not identical with what best serves the human good.
- Over generations, unless the market’s biases are counterbalanced by other forces in the society, the market will inevitably move the consciousness of the society’s members in the direction of seeking happiness in terms of what can be bought and sold—with decreasing emphasis on what individuals cannot buy or sell, like good social order, a healthy planet, moral virtue, and spiritual wisdom.
- Over time, the society that leaves the market system unfettered will tend to generate a rich private sphere and a more impoverished public sphere.
- Over time, unless the market is properly regulated, the capital that humankind has been handed in the form of a healthy planet will be spent as if it’s worthless. (Producers calculate their profit without putting the costs of planetary damage on their books, and consumers make decisions based on prices that don’t reflect the long-run impact of their consumption.)
In the market, we are social atoms. But we are not only separate actors. And the unfettered market is unable to weigh its impact on our interconnected world.
Polluters have killed probably millions of Americans over the generations, but the market gave them no reason to give any weight to that destructive impact.
Only regulation – collective decision-making through political intervention — can assure that the costs of making people sick and killing people are given proper weight.
Some talk as if “regulation” is bad. That’s utter folly. The only question is how best to do it: what forbidden, and what required? What taxed, and what subsidized? How to balance our freedoms as separate actors and our shared values that need our collective action to protect?
Perhaps those who think “regulation is bad” need to make first a spiritual shift: recognizing the profound ways in which, as Wendell Berry has said, Man’s Economy is not God’s economy.
In God’s economy, the ways in which the whole system is interconnected receive the attention they require. Citizens in a society with a market economy, where everyone is a separate self-interested actor, need to figure out the best ways to use collective decision-making to move toward the greater wholeness of “God’s economy.”
Nowhere in the history of market economies is the need to correct its blind spots – and the fallibility of the human economy — more dramatically shown than in the current climate crisis.
For generations, people lacked crucial information as they made decisions regarding their production and consumption of fossil fuels. Producers decided based on what it cost them to get their product onto the market, while consumers made their decisions based on how much utility they reaped from its consumption.
The market had no way of knowing, and thus did nothing to inform economic actors, that all these transactions were brewing a catastrophe of historic magnitude.
And now that we do know the perils of burning fossil fuels, altering the atmosphere in ways that threaten human civilization, the market still has no way – by itself – of directing the actors to do what is urgently needed.
Hardly what God’s economy seeks to assure.
God’s economy operates in terms of the Whole, while the market is an atomistic system that is unable to compute what the Whole requires.
Without its blind spots corrected, the market is reckless. When our action as social atoms is combined with implementing our best collective judgments, the market is a marvelous tool.
Andy Schmookler is the author of The Illusion of Choice: How the Market System Shapes Our Destiny (SUNY Press) and Fool’s Gold: The Fate of Values in a World of Goods (HarperSanFrancisco).