Misconceptions of State Solutions


Much of the free market message consists of making the moral case for voluntary (market) solutions over involuntary (state) solutions, followed by numerous thought experiments and historical examples of ways that the market can solve a societal issue.

But there will always be examples, for those both on the left and right, of the market clearly failing to provide a solid solution to a problem. Conservatives point to drug trades, internet censorship, and easy access to pornography as problems facilitated by the market, with free-marketeers admitting that these will all exist in their laissez-faire world. Leftists point to rising inequality, financial crises, labor exploitation, and corporate corruption.

In a certain manner, these criticisms are just. Evidence supporting all of these criticisms can be found in capitalist societies. But in another manner, these criticisms are unfair, and provoke questions in response.

Compared to What?

When trying to improve any part of the world, it’s obviously necessary to have an ideal as a goal to aim for. When acting, comparing the current world to the ideal in mind is a measure of success. Trying to end poverty, violent crime, or hunger? There’s nothing wrong with aiming for a world absolutely without poverty, crime, or hunger.

It is, however, a problem when the difference between the real and the ideal is used to imply the real is a failure. There will always (at least for the foreseeable future) be people struggling to get by, just as there will always be people who are unfairly treated by others. The market is, fundamentally, all voluntary human interaction. Since human beings are fallible, there will no doubt be problems within the market, and not all problems can be perfectly solved.

Why the Market?

If we accept that the market cannot solve all problems, and we accept that bad things will happen within the market, then why argue for the market?

The simple answer is that it’s still the best option available. The market cannot be compared to a utopian ideal, since it will always fall short. It must instead be compared to other realistic options. Too often, arguing against the market is based on the following faulty logic:

If A < B, then C > A

If A (the market) is inferior to B (the ideal world), then C (a different system) is superior to A (the market).

Failure of the market to live up to the ideal does not imply that state solutions are suddenly the correct answer. We don’t argue against socialism by comparing it in practice to a utopian capitalist world. We simply compare actual socialism with actual capitalism, and the latter is clearly superior.

There will always be things like drug use and poverty in a free market. But, as we have clearly seen throughout history, state intervention is no closer to the ideal than the market; quite the opposite, in fact.

What is the True Cause?

The real world is not divided into perfect examples of laissez-faire and interventionism. Every society is some mixture of the two, which means that a particular problem in a primarily capitalist country cannot necessarily be blamed on capitalism. States are constantly intervening in domestic affairs. Some industries, like the United States healthcare industry, is such a mess of private companies and non-profit organizations mixed with regulation and bureaucracy that it would be unfair to describe it as a clear example of private or public healthcare.

And although there is an inescapable binary, meaning that all interaction must either be voluntary or involuntary, there are many different forms of each of these. A voluntary society with a hedonistic culture will be (unsurprisingly) hedonistic. A puritanical voluntary society will be (unsurprisingly) puritanical. There are certainly problems within society that can be better cured by a cultural shift than by state intervention.

To simply identify problems within a relatively free-market system then is not an argument for a different system. Neither does it establish a clear cause-and-effect in a world of mixed economic systems. Problems will always exist that the market has yet to perfectly solve. This does not mean a state solution will be any better.

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Nathan A. Kreider is author of the Misconceptions column for Being Libertarian, and has written for the Austrian Economics Center, the Foundation for Economic Education, and the Liberalists. He also occasionally publishes a blog and video content, including short book reviews, which can be found on his website, nkreider.com. He can be contacted by email via [email protected]


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