For and Against the Free Market

> Epistemic status: I read a book and talked to my wife.

> Trigger warning: If you are either far to the left, or the right, this content may come out as political. That is not my intention, I merely want to discuss a hard problem.

I grew up in Sweden, the once poster country of soft socialism or at least liberalism. I was taught in school that there are Market Economies (like the United States) and there are Planned Economies (like the Soviet Union or Maoist China). Sweden on the other hand was obviously none of those, but rather a Mixed Economy. That meant that while we posed a very socialistic exterior with obvious socialistic treats such as generous welfare, free healthcare, and ridiculously high income tax (around 80%), the Social Democrats understood that if they would interpolate that kind of taxation towards the high earners, they would soon move to Belgium, Monaco or Switzerland. Well, some did anyway, but the tax for assets, and the way companies pay tax works entirely differently in order to make them stay.

Now, that was a bit of an aside, but the thing is, the freeness of the market also varies quite a lot, especially today. We have one of the world's most unregulated school systems where anyone can run a school, for profit, while receiving money per pupil from the state, same as the public schools get, as long as they follow some basic rules of what children are supposed to learn (which does not seem to be that much these days). Most of the healthcare is dealt with by private actors while a few bigger hospitals are still run by the public sector. Someone even thought is was a good idea that a caregivers and pharmacies could have the same owners or "co-operate".

Don't get me wrong here, I am generally for free markets, even to some extent with a laissez-faire approach. I have read enough of Thomas Sowell's book Basic Economics to understand that it is always the most efficient way of redistributing limited resources with alternative usages. For example, in the city I live in, there are always too few parking spots available. Sowell would ask how the price of parking is set, and the answer is some old men and women in the town hall has set prices that they think no one will get angry at them for setting. The problem is of course that the prices of parking is artificially low. Low enough to eliminate it as input for choosing the car or the bus/train when going into the city. A sign of this is the private parking options which are indoors are ten times the hourly rate and that is not just because it is indoors. It is, with these artificially low prices, impossible for any private entrepreneur to build a private parking area outdoors anywhere near the city center. I am not saying I do want to pay more for my parking but I certainly want to be able to find me a parking spot the few times I do visit the city.

The same things obviously applies to rental apartments but let's not go there. Some things are just too difficult to centrally control in detail.

So where am I going with this? I think there are three main types of situations here:

Systems that handle themselves well (with some regulation and control)

Systems that need heavy regulation and control so the actors do not misbehave

Systems that can only work with a single, state-controlled actor

I think the difference between the first two are basically information imbalance. The more the customer can know about what they are buying, the less control is needed, it will sort itself out. Bad actors will put themself out of business because no-one will buy from them and the word will spread. With internet shopping, even internationally, this has become very clear. On the other hand, as soon as there is some aspect of the good that the customer cannot themselves assess, we need regulations and control. An example of this would be specification of the origin of meat, which is kind of difficult to spot for the untrained eye. Another one would be the quality of a school's education, as most of us do not get the chance to try out that many during a life time, at least not of the same level.

What About Values?

Now, let's move from the rather straight-forward (but still tricky for many people) idea of monetary value, to something that can be entirely unrelated, namely values. Values are something we have but we do not need to explain them. Maybe we can't even do that, but nonetheless they are very important to us. Commonly they are important to us as a group, a people, or a sub-culture even. Most specifically, they are more important than money, and more important than the economy. That is why we saw the UK leave the EU, even if it was bad for the country's economy. Values are not necessarily about a sense of control over one's own country, law and borders, it can also be about fairness.

Sometimes fairness is more important than having a system that is optimized for efficiency. A very rational reason for this is that we might not even agree on what efficiency is. Is it that resources are being equally distributed to everyone? Is it that resources are being perfectly distributed to people either by desert or need? Is it that we are using our resource so that the waste is as small as possible? Or is the most important thing that everyone feels that they are getting their fair share? Or maybe that nobody gets to fool another?

Do we value our local businesses? Is it a pity that they close because we shop online instead for cheaper prices? Apparently not.

Conclusion

A free market cannot optimize for all of those targets, especially not at once. This is why I think we must regulate where we think it is important and where it makes sense to do so, but never beyond that. I think, in this country we sometimes fall short and sometimes go too far, and some of those places are where we have our biggest difficulties today as a society. Overregulation is a thing, but so is underregulation.