Liberty Requires Rights Exercised in Free Markets

The free market is waning in today’s uber-regulatory world. The government tells us what we must inject into our bodies to get a job, what products we can–or must–sell, what people we must serve–or reject, the wages we must pay–and receive, the price at which we can buy and sell products, and more. Capitalism, which as the replacement for feudalism allowed for the first time in history people from all classes to freely use their land, labor, and capital to their own benefit, is rapidly being replaced by a modern-day feudalism in which the wealthy and politically connected are once again becoming our lords.

There have been certainly challenges with capitalism over the last several centuries since it sprung out of 14th-century Renaissance Europe—poor working conditions, fraud, and strained relationships between owners and workers among them. Even so, the benefits of capitalism are indisputable in terms human prosperity and health.

Also indisputable is the history of failure by government officials who attempt to override consumer preferences—and God-given rights—by intervening in markets in the name of “consumer protection.” Yet the interventions—and failures—continue unabated.

The justification for these assaults on the rights of consumers to express their preferences through markets has perversely evolved into support for positive “human rights,” which “impos[e] corresponding obligations on governmental duty-bearers.” The obligations of government officials include providing citizens “the enjoyment of the highest attainable standard of health,” defined as “a state of complete physical, mental, and social well-being and not merely the absence of disease or infirmity.”

Yet a long line of philosophers, theologians, and political thinkers—such as Augustine, Thomas Aquinas, Martin Luther, John Calvin, John Locke, and Thomas Jefferson—have understood that humanity’s “Unalienable rights” are not supplied by government but instead are “endowed by their Creator.” These rights are to be exercised individually and collectively by people. Outside the family, the primary way we do this collectively is through executing their decisions about our lives, liberty, and property through markets.

Most interventions in markets, then, do not improve human rights but degrade them, in opposition to the purpose for which governments are formed: “That to secure these rights, Governments are instituted among Men.” This is not surprising, given how government intervention through regulations, mandates, and taxes stands in stark contrast to the voluntary nature of interactions between market participants that focuses attention on the needs and desires of consumers.

Interventions in market activities are also justified because they “protect the environment, workers, and consumers.” In some instances regulators purport to act in order to “improve market information” that both regulators and consumers can use to monitor and improve business activity: “Today’s proposal would help us understand better how to protect consumers’ access to mortgage credit.” However, regulations generally reduce the information needed for market participants to carry out the efficient and fair operation of markets.

The reason for this is simple; market prices of goods and services transmit important information through the marketplace to market participants, i.e., buyers and sellers:

Prices are crucial for setting priorities. Without prices, we fly blind. We do not know what things cost. We do not know what people have recently bid in order to buy or rent scarce resources. In a world governed by scarcity, prices are tools of understanding and therefore tools of action. Prices are the most important sources of information that lead to the coordination of competing economic plans of action.

Prices are objective. They are the product of competitive bidding in the market. They are the results of the people with specific information who are willing to put money on the line by buying or selling assets. The information conveyed by prices is highly specific.

Market intervention by government distorts market prices, thus distorting and reducing the information available to buyers and sellers. And reducing the quality of the decisions made by them.

An extension of this is that intervention, by design, changes or even prohibits the market outcomes that would have resulted through the voluntary actions of buyers and sellers in the market. The result is that intervention replaces consumer preferences (to a greater or lesser extent) with those of the regulators and other parties, usually those seeking to profit through regulation.

Friedrich Hayek explains why the substitute decisions of regulators will always be inferior to those made by buyers and sellers acting on information (knowledge) transmitted by market prices:

the sort of knowledge with which I have been concerned is knowledge of the kind which by its nature cannot enter into statistics and therefore cannot be conveyed to any central authority in statistical form. … It follows from this that central planning based on statistical information by its nature cannot take direct account of these circumstances of time and place …

If we can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place, it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources immediately available to meet them. We cannot expect that this problem will be solved by first communicating all this knowledge to a central board which, after integrating
all knowledge, issues its orders.

The harm to human health and prosperity caused by the substitution of the preferences of monarchs, politicians, and bureaucrats for those of millions of subjects, citizens, and consumers is incalculable. Even a cursory review of economies where substantial restrictions on rights and markets are endemic establishes that the harm is real and continues to this day.

Gary North explains: “One of the fundamental principles of all systems of economic theory is this: ‘You can’t get something for nothing.’ Christianity teaches that God offers saving grace to some people without cost to them. But this grace is based on the high price that Jesus Christ paid at Calvary.”

The high price of increased prosperity and advances in human health throughout history has been the messy business of people exercising their God-given rights through markets. This enables them to absorb information and convert it to useful means of satisfying their needs and wants. Though costly, only in this way has mankind been able to build up enough capital to enjoy the economic, environmental, and health care advances we are experiencing today.

For millennia, rulers and experts have attempted to clean up the mess of humanity—for many reasons, including concerns about diminishing supplies of fuel, pollution, or climate change—by substituting their judgments for those of common citizens. But these efforts are destined to fall short and leave humanity in a worse state. The moral and most effective way to improve the condition of mankind and our planet is through the exercise of our “unalienable rights” in free markets.