Mischievous Free Markets

In all the discussions of economic problems that
I read, and hear about, there is one problem that
never seems to get mentioned, or addressed. That
problem is the fact that a free market system is
inherently unfair, unfair to the point of creating
an exaggerated unfairness. Although the word "free"
n "free markets" implies, ideally, no unfair
manipulation of the market by humans, there is an
obvious and pronounced natural unfairness in the
results of free market operations. The basic
unfairness is that for the sale of a given type of
product or service there are always many fewer
"winners" than "losers" of the available market
within the practical transportation and communication
range of a given group of sellers.

If every person had a different product or service to
sell then a free market would simply function to
determine the relative barter value of each product or
service. But, of course, many people will be trying to
sell similar products or services. In this situation
the free market will favor the very smallest
minority of sellers who are able to supply the products,
or services, at even just a slightly lower price than
any of the rest.

The consequence of this selection process is that if
someone can provide a product or service at, say, 2%
less than his competitors, he will likely get a 100% to
1000 plus % increase in his sales volume and income.
Is this disproportionate increase in income relative
to price drop fair? Has this seller really provided
1000% more economic benefit to his community?
I think not. I believe it is just the result of a
mischievous over rewarding idiosyncrasy of a free
market system. This unfair result can, of course,
be quickly escalated into a much further unfair
advantage.

A free market has been shown to be much better at
selecting useful production priorities than does a
planned economy, mostly because it puts a great many
heads together working on the problem rather than just
a few, but it leaves the matter of an economically
sound distribution of income in as indifferent and
primitive state as the law of the jungle.

The free market idiosyncrasy referred to above does a
great job of building up "the nation's" capital
facilities, but do these capital facilities, and their
income, really belong, quantitatively, to most of
the people of the nation, or to just a comparatively
few?

There is a mantra that goes "Capital investment
creates jobs". It is true, of course, that if
capitalists can hire people fast enough to create
improved capital facilities faster than the use of
improved capital facilities replaces the need for
workers, or if they can produce "make work" products
and services like grossly redundant Dot Coms, then
there will be a concurrent increase in the number
of jobs. But this is an obvious treadmill which the
Federal Reserve has a very hard time keeping well
oiled, and I personally can't picture it running
well forever.

I will not drone on here, though, about all the
kinks in the capitalist machinery. I simply want
to make the point that the typical distribution
of income brought about by a free market system
tends to be drastically unfair without any necessary
intention on the part of its participants, although
I'm sure that most people who are involved in trade,
or even just contemplate it theoretically, understand
the winning and loosing odds involved. But nobody
seems to mention that this situation spells economic
and social trouble.

I think that this natural tendency toward a
maldistribution of income in a free market system
could be most easily compensated for by the use of
a negative income tax rather than the expensive,
clumsy, abusable institutions we currently have.

I welcome contrary comments.

 

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Hi Kmguru:

Regarding your reply to this same thread on the Ethics forum.

Thanks for your thoughts on my concern about some apparent mischievous effects of free
markets. But in referring to the free market as an ecosystem you did not make note of the fact
that in a healthy ecosystem all the necessary resource factors are continuously, and fully, being
recycled. Such is definitely not the case in the activities of our, at least semi, free market
system today, as reference to the two URLs below will abundantly attest regarding the factor
of money.

http://alltheweb.com/search?cat=web&lang=english&query=Economic statistics

http://www.brook.edu/views/op-ed/baker/19990205.htm

I gather by your references to Dr. Hammer's ideas that you believe any malfunctioning in an
economic system can most appropriately, and effectively, be fixed by using his system rather
than such a grossly simple system as systematically slightly rebalancing the distribution of
wealth in the world by use of a negative income tax.
I tried to learn about Dr. Hammer's ideas on the Internet but I was only offered the option of
hiring a speaker on the subject. Could you perhaps summarize for me the essence of his
ideas?

 

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