Thursday, 26 January 2017

Why we need faith in The Market

Now Thomas (also known as Didymus), one of the Twelve, was not with the disciples when Jesus came. So the other disciples told him, “We have seen the Lord!”

But he said to them, “Unless I see the nail marks in his hands and put my finger where the nails were, and put my hand into his side, I will not believe.” John 20: 24-29
This is the dilemma of faith. You will, I'm sure recall when Arthur Dent is introduced to the babel fish in Douglas Adam's 'Hitchhikers Guide to the Galaxy':
The speech patterns you actually hear decode the brainwave matrix which has been fed into your mind by your Babel fish.

"Now it is such a bizarrely improbable coincidence that something so mind-bogglingly useful could have evolved purely by chance that some thinkers have chosen to see it as a final and clinching proof of the non-existence of God.

"The argument goes something like this: 'I refuse to prove that I exist,' says God, 'for proof denies faith, and without faith, I am nothing.'

'But, says Man, the Babel fish is a dead giveaway, isn't it? It could not have evolved by chance. It proves you exist, and, by your own arguments, you don't. QED.'

'Oh dear,' says God, 'I hadn't thought of that,' and vanishes in a puff of logic.

'Oh, that was easy,' says Man, and for an encore goes on to prove that black is white and gets himself killed on the next zebra crossing.
And, as many have observed, faith does matter because it represents the unprovable premises on which we build our arguments. We are right to, as St Thomas did, doubt but if we only accept that which is before our eyes, what we can see, feel, taste or hear, then we deny things that are really important - love, honesty, creativity, hope.

Here, in a critique of something called 'neoliberalism' (the existence of which I doubt but that's another story) we see the denial of the transcendent, refusing to accept something exists because it is abstract, incorporeal:
The market, which is essentially a useful tool (and like all tools limited) has been converted into a false god The Market. Markets make poor gods for many reasons, but primarily because they don’t exist. A market is a space, not a thing; it is a vacuum; it is a space within which human beings trade stuff. Trading stuff is also useful preparation for doing other stuff, like making, healing, building, growing and creating. The market does not do any of those things - people do - but the market helps people by because people can use trade to get the useful things they need from others. Markets can help people be productive, but they are not productive in themselves.
So The Market exists because people want to exchange. The accumulation of all those exchanges, however conducted, is The Market. And the benefit we get from this exchange - trade as the writer rightly calls it - is that we can focus on the things we're best at, on what David Riccardo called comparative advantage. Here's Don Boudreaux:
...the only economic reason for trade is that each of us produces some goods or services at costs lower than the costs that our trading partners would incur to produce those same goods or services. That is, each of us has a comparative advantage in supplying the goods or services that we sell to others, and a comparative disadvantage in supplying each of the many goods and services that we buy from others.
So The Market does exist (whether or not you use capitals) even though we can't take your hand and plunge it into the spear wound so as to prove its existence. Even where, as with some very important things like health and housing, the state has tried to control (or even abolish) the market, The Market still exists. The best examples here are criminal markets. We have for all sorts of 'good' reasons made some products illegal yet there still exists a market for those products - this is the dilemma of public health's approach to smoking. We are nearing the point, may even have reached it, where further increases in the price of tobacco only act to increase the illegal part of the market - with all the risks associated with criminal markets (we see these with the market in illegal drugs, for example).

The question that our writer poses (although mostly fails to answer) isn't whether or not markets exist or even whether they are a good thing. Rather the question is whether we should 'worship' those markets. Since there is, so far as I'm aware, no actual ritual worship of The Market, I have to assume that this is meant metaphorically and refers to the viewpoint that The Market is the most efficient way to allocate scarce resources. But is the belief that the market, under most circumstances, is the fairest means to allocate resources an act of 'worship'? It may be faith just as a belief in the efficacy of democracy, government or the 'rule of law' is an act of faith but it is not worship.

The debate that prompted the comment about markets began with a simple question: if it wasn't the liberal belief in markets that led to the fastest decline in absolute poverty the world has ever seen then what was it? Inevitably this discussion became one about the UK rather than the world and, as these things do, resulted in the assurance that inequality and poverty are essentially the same, and that government is the primary agent of poverty reduction (more specifically that taxation is essential to poverty reduction).

As a conservative I am not a market fundamentalist but I do not believe that, in the long run, taking money forcefully off one set of folk to give it to another set of folk represents any sort of solution to poverty. I'm also a pragmatist and this means that, given the evidence, open markets deserve our support as they are better able to meet human needs than planned systems managed by government. This doesn't preclude regulation or even direct government provision, it merely recognises that we have to balance the social benefits of such actions against the disbenefits of interfering with the market.

We live in a world largely created by the action of markets, by that specialisation that is central to Adam Smith's ideas and to the concept of comparative advantage. The Market is not an end in itself worthy of worship but rather, for all its abstract nature, a means by which we make for a better world. Without our faith in the efficacy of markets there would be no specialisation, no free exchange and less innovation. Believe!


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