It is far more difficult to combat faith than it is to combat reason and knowledge. A faith that there can be such a thing as a “free” market, or unambiguously “private” property, is difficult to shake.
Take the notion of a free market: there is no exact definition, but try “An economic system where prices, wages and trade are unregulated and prices are determined by competition between businesses”. There has never been a truly free market because a “free market” is an ideal and interesting idea but, unfortunately, it is an ideal lodged in faith. The free market article of faith cannot cope with a complex society, because regulations exist at all levels of society protecting private property and public speech, enforcing contracts, plus a myriad of other things.
As I have noted elsewhere, Adam Smith recognized the importance of faith when discussing the workings of things we don’t really understand. Smith said adherents of polytheistic religions, the faithful, see “the invisible hand of Jupiter” in thunder and lightning, storms and sunshine, and other irregular events (The History of Astronomy) – other religionists might see the invisible hand of god in natural disasters (punishing the USA for condoning homosexual behaviour). We do not understand how economies work, why some are rich and some are poor, and Smith said that, to the faithful, it seemed that the rich were “led by an invisible hand” to advance the interests of society – “When Providence divided the earth among a few lordly masters, it neither forgot nor abandoned those who seemed to have been left out in the partition” (The theory of moral sentiments).
“Free enterprise” is essentially synonymous with free market, though preferred by some as having more gravitas. Paul Ryan’s article of faith that we can promote “economic growth through free enterprise – because nothing has done more to lift people everywhere out of poverty” has a doubtful validity, in the end it is simply an article of faith. What is “free enterprise”? Median incomes increased greatly during the Clinton administration, median incomes declined during the W Bush administration, so does free enterprise flourish more under a Democrat’s administration than a Republican’s administration? And what are the economics of that outcome?
I’m not sure of the nature of “mainstream economics”, but I hear a muezzin’s call to the faithful in the Ryan-directed House Republican 2013 budget “The Path to Prosperity” (an extremely partisan document):
Mainstream economics, not to mention common sense, teaches that raising taxes on any activity generally results in less of it. Economics and common sense also teach that the size of a nation’s capital stock – the pool of saved money available for investment and job creation – has an effect on employment, productivity, and wages.
Employment, productivity, and wages all seemed to increase in the 1990s during a period of rising taxes. Perhaps Ryan et al are in thrall of the convenient Laffer curve faith, not any mainstream economics knowledge? – see my discussion of the laughable Laffer.
In Jeffrey Tucker’s explanation of “Cooperation: How a Free Market Benefits Everyone” there is an implicit obeisance to Adam Smith “society functions and grows wealthy even without a visible hand directing its path” and a claim that there is a law of comparative advantage (“a law like gravity, not a law like the speed limit”) that remains undefined in Tucker’s exposition and certainly there is no equation given. The law of comparative advantage has been defined elsewhere along the lines of “The concept, formulated by British economist David Ricardo, according to which economic agents – people, firms, countries – are most efficient when they do the things that they are best at doing”, which seems closer to a traffic law. Another source has a more surprising take:
In essence, the theory of comparative advantage says that it pays countries to trade because they are different. It is impossible for a country to have no comparative advantage in anything. It may be the least efficient at everything, but it will still have a comparative advantage in the industry in which it is relatively least bad.
Tucker has no definition of what constitutes a free market, and no definition of comparative advantage, but he does tell us:
I speak of the division of labor, also known as the law of comparative advantage or the law of comparative cost, and also known as the law of association. Call it what you will, it is probably the single greatest contribution that economics has made to human understanding.
but we are given a trivial example of exchange: bartering bagels and pies. Talking of faith, Tucker uses Catholic Popes as authorities, and “It was first described with rigor by late-medieval monks working in Spain”.
Blaise Pascal believed that it was impossible in principle to acquire or support genuine religious faith by reason, because genuine religious faith was a pure gift from God. Is economics a religious faith for some?
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