for A-plus writer

gregory velazco y trianosky

california state university, northridge

phil 305 business ethics

spring 2014

notes on two free market philosophies

Both philosophies take perfect competition as the ideal; but they disagree on how to implement it. Laissez-faire philosophy simply recommends implementing the same rules now that we would actually find in an ideal, perfectly competitive economy. Competitive philosophy instead recommends rules promoting whatever government involvement in the economy is necessary in order to get us closer to the ideal.

1. The philosophy of Laissez-faire free market=df the government should only have rules that prevent the use of physical force, theft, fraud, or breach of contract.

A. “According to the [Laissez-faire] free market [philosophy], a secure system of private property rights is an essential part of economic freedom. Such systems [should] include the following rules of rights and obligations:

· No use of physical force

· No fraud

· No theft

· No breaking of contracts[footnoteRef:1] [1: Compare Wikipedia, “Economic Freedom,” 1.1): the right to control and [use one’s] property [as one sees fit] the right to transfer one’s property by voluntary means [i.e., without the use of force, fraud, or theft] the obligation to refrain from using force, fraud or theft on the property or person of another the right [to establish contracts] on any terms and conditions one sees fit the obligation to follow through on the terms of any voluntarily agreed-upon contract. ]

B. In theory, competition in a laissez-faire free market is supposed to work exactly the way it does in the model of perfect competition. (Wikipedia, “Free Market”, 2.1-2.2)

C. The realities of a laissez-faire free market: the development of “combinations and conspiracies in restraint of trade” (illegal under the present system in the U.S., but not in an unlimited free market)

e.g. oligopolies like OPEC (see Wikipedia article on same, particularly the impact of the 1973 oil embargo declared by OAPEC (in response to the U.S. support for Israel during the Yom Kippur war), which lasted for a year. (See Wikipedia, “1973 oil crisis,” esp. chart on oil prices 1861-2007.)

e.g. monopolies like Microsoft (with respect to operating systems on desktops & laptops) using their monopoly power to create artificial “entrance barriers” for competitors. See 1999 article by Be Inc. CEO Jean-Louis Gassée, (archived at http://www.webcitation.org/query?id=1298667420478086 ) on the MS “Windows rebate scheme” to OEMs: price to OEMs=base price minus rebate; rebate essentially contingent on OEM’s crowding out other OSs. (BeOS, Linux)

2. The philosophy of a competitive free market=df the government should have rules that promote full and free competition[footnoteRef:2] [2: See e.g. http://www.justice.gov/atr/public/press_releases/2013/296018.htm on antitrust ruling by DOJ regarding Modelo beers.]

“Some advocates of free market ideologies have criticized mainstream conceptions of the free market, arguing that a truly free market would not resemble the modern-day capitalist economy.”

A. For one example, see “Misconceptions”, sec. 4 of Wikipedia article, “Free Market”:

For example, contemporary mutualist Kevin Carson argues in favor of ‘free market anti-capitalism.’ Carson has stated that ‘From Smith to Ricardo and Mill, classical liberalism was a revolutionary doctrine that attacked the privileges of the great landlords and the mercantile interests. Today, we see vulgar libertarians perverting ‘free market’ rhetoric to defend the contemporary institution that most closely resembles, in terms of power and privilege, the landed oligarchies and mercantilists of the Old Regime: the giant corporation.’[21]

Carson believes that a true free market society would be ‘[a] world in which... land and property [is] widely distributed, capital [is] freely available to laborers through mutual banks, productive technology [is] freely available in every country without patents, and every people [is] free to develop locally without colonial robbery...’[22]”

B. Another example (ibid. “Criticisms”): “Two prominent Canadian authors (both very hostile to the "Chicago School" philosophy) argue that government at times has to intervene to ensure competition in large and important industries. Naomi Klein illustrates this roughly in her work  The Shock Doctrine . While its supporters argue that only a free market can create healthy competition and therefore more business and reasonable prices, opponents say that a free market in its purest form may result in the opposite. According to Klein and Ralston, the merging of companies into giant corporations or the privatization of government-run industry and national assets often result in monopolies (or oligopolies) requiring government intervention to force competition and reasonable prices.[23]

See also: http://weakonomics.com/2010/03/25/free-markets-vs-competitive-markets/

· These two philosophies present two different ways of trying to get closer to the ideal of perfect competition: relying on unforced choices of individuals (laissez-faire philosophy), or the choices of individuals guided and supplemented by some government interference (competitive philosophy).

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