The free market

In Chapter 4 we looked at the regulation of public safety. One reason why regulation can be necessary is that the free market cannot always be trusted to deliver outcomes that will seem to be socially acceptable. In the case of safety we noted that there are at least three reasons why the free market may go astray. First, in many cases one person’s purchasing decisions will have effects on others. This is the problem of ‘externalities’. An example was ‘lowstandard car parts’ where my purchasing decisions can make me a danger to others. Second, where there is a monopoly, as for example with railway travel, there is no free market. Those who don’t like what is on offer cannot find another supplier. A monopolist has huge market power and it seems generally accepted that the public interest calls for independent scrutiny and regulation. Finally, and this is a common problem with virtually all markets, there is an asymmetry of knowledge. Typically the seller of a product will know much more about it than the purchaser, and if the transaction was completely unregulated might be able to get away with selling goods that don’t actually match the purchaser’s expectations. As we can see these problems are not exclusive to the issue of safety; they could affect many types of products. Critics of the market – especially capitalist forms of the market –

can find other ammunition too. For example, market relations are often said to lead to injustice in labour relations. Capitalists,

especially if acting in combination, have a powerful bargaining position which they can use to impose low wages and harsh conditions especially on non-unionized, low-skilled workers, for whom the only alternative is unemployment. This, of course, is a version of the classic Marxist argument that capitalism leads to the exploitation of workers. Of course a lot has changed in the 150 years or so since Marx presented his forceful case, and as a generalization it no longer seems to hold. It would be absurd for many well-paid salaried workers in the developed world to claim that they are exploited in anything like the sense Marx had in mind, even if they may have other complaints. Yet one can hardly deny that there are large pockets of the economy – and especially the world economy – where the accusation rings true. But I want to put questions of justice between worker and capitalist to one side here – important though they are – and to look at some less-discussed controversies about the free market. The point of this chapter is to look at the wide variety of situations

in which we try to protect areas of life from the encroachment of the market, and the reasons why we might limit, or, at least, try to regulate market transactions. Rather than asking the question, ‘the free market: for or against?’, it seems more reasonable to ask, ‘the free market: when and when not?’ That is our question in this chapter.