Markets do good things in a way that is already aligned with our natural self-interest.
Samuel Gregg and Richard Reinsch have written an article for the most recent issue of National Affairs in which they argue for free markets against the recent bipartisan tendency to bash them. In it, they rely heavily on the thought of German economist Wilhelm Röpke, who stood up to the Nazis in his arguments for human dignity and liberty. After World War II, Röpke was instrumental in the market reforms that allowed West Germany to take off while East Germany suffered under decades of socialism.
Gregg and Reinsch’s entire article is worth your time, but I want to zoom in on this section, which contains a point worth stressing:
Röpke’s emphasis on civil society aligned with another theme he believed relevant to restoring markets in America: his conviction that markets represent the economic system that best accords with human nature. Indeed, part of markets’ essential legitimacy, Röpke believed, derives from how they reflect certain universal truths about the human condition — truths we defy at our peril. In his later writings, he drew attention to features that distinguish humans from all other creatures, among them reason, free will, and insight, and thus the capacity for creativity. To Röpke, this suggested that any economic system that represses liberty or discourages economic creativity is bound to run into trouble.
Markets, according to Röpke, not only enhance liberty and encourage ingenuity, they also bring together human individuality and sociability in ways that generate wealth and enable us to overcome the problem of scarcity. Röpke recognized that humans are individuals insofar as each person is unrepeatable and unique, but he combined this recognition with an understanding that humans are also social beings who need relationships with others if they are to flourish. In an economy based on free exchange and the division of labor, there can be no Robinson Crusoes. However, that same economy’s dynamism depends on the unique insights and creativity of entrepreneurial individuals.
Finally, Röpke pointed to another element of human nature that should incline us to embrace market economies: the fact that people tend to act in their own self-interest. Markets, Röpke emphasized, have a remarkable capacity to align human liberty and self-regard with a society’s progress toward a more prosperous state of economic well-being. As people pursue their self-interest and respond to market incentives, unintended but beneficial economic consequences for others — including the creation of new jobs, the generation of greater societal wealth, contributions to technological development, and the provision of the material resources that allow us to be generous to others — naturally follow.
I would summarize these paragraphs in two sentences:
It’s true that government interventions in the economy can cause inefficiency, and those facts are worth pointing out in policy debates. But when talking about markets in general, free-market advocates, of which I am one, need to remember this point that Gregg and Reinsch lay out so well. Markets are good because they help coordinate human behavior in good ways. They help us to meet the needs of others. They help alleviate poverty. They help teach personal responsibility. And when lots of people participate in markets in the same place at the same time under the rule of law, markets facilitate strong communities.
Because markets do those good things in a way that is already aligned with our natural self-interest, they are more efficient than government’s attempts to replicate or fine-tune market outcomes. Ignoring that truth is how we get situations like the one we’re in today, where the federal government spends almost $30,000 on antipoverty programs per person below the poverty line, or where past failed industrial policies need to be “fixed” by another government intervention. One more tariff, one more subsidy, one more welfare program — this time we’ll get better results. Working against human nature makes that unlikely.
Expecting people, including the politicians and bureaucrats who design economic interventions, to act contrary to their self-interest is foolhardy, but it’s a prerequisite for government planning to work. The Soviet Union understood that. That’s why the communists had to try to create New Soviet Man. But New Soviet Man never existed, and now the Soviet Union doesn’t either.
The socialist error is summed up by Röpke as “its steadfast denial that man’s desire to advance himself and his family, and to earn and retain what will provide his family’s wellbeing far beyond the span of his own life, is as much in the natural order as the desire to be identified with the community and serve its further ends.”
Gregg and Reinsch write:
The moral foundations of the market economy are derived from a realist conception of human beings — realist in the sense that they are true to what humans are. They recognize that humans are simultaneously individual and social beings who possess reason and free will; who are creative and self-interested; and who are fallible but also capable of realizing virtues of the commercial, classical, and religious variety. In this sense, there is nothing abstract or artificial about markets: They simply take human beings as they are.
Taking human beings as they are is the starting point for conservatism, which rejects progressive notions of the perfectibility of man. That’s why, for example, William F. Buckley Jr. wrote in the 1955 mission statement of National Review that “the competitive price system is indispensable to liberty and material progress.” Free markets are not optional to the American conservative project. They are foundational — because they are good.