A few questions (free market as a natural system, institutional racism, etc)

Economics Economics Questions
1

Hi,

I am new to the forums. Some background if you are interested: I am a 21 year old college student studying finance at Georgetown. As a business major and living in Washington, my grades and future job prospect rely on me learning mainstream economics/politics. However, this year I was introduced to Austrian economics, Ron Paul, etc and it blew my mind. For the past few months I have been reading and discussing as much as I can.

Clearly, I still have a lot to learn. I would like to ask a few questions that have come up in debates/classes that I have not been able to answer.

1a) My philosophy teacher is very much against the free market. I don’t think he is a Marxist exactly, but he has very leftist views and makes them known (we use his book as the main text - ugh.) Today he said “It is not a question of if we need the stimulus - we know that from Keynes and the Great Depression - but who should benefit the most from it” (he means the poor). I wanted to just leave but it was almost over so I stayed.

Anyway, earlier he was talking about how the free market is not a natural system. He used a quote from Adam Smith, who says “Civil government, in so far as it is instituted for the security of property, or of those who have some property against those who have none at all” (Smith, 674). My professor says that Smith “understands that property rights are not a fact, but a societal action taken in favor of some and against others.” He claims that property is thus in the realm of values as opposed to facts, and thus the free market - relying on property - is not a natural system. Is he misunderstanding Smith?

1b) A related question - Does the fact that the free market need something to protect property rights/enforce contracts mean that it is not a natural system? And what are the ways in which property rights are protected in a free market (is it possible to have government protect them and still have it be a free market?)

2a) My girlfriend is very liberal - she supports communism/Marxism. At this point I cannot debate her on whether or not Marx is wrong, even though I know he is. This is because she has read Marx and is very knowledgeable on the subject, and I have not read his texts, nor have I really debated it with anyone. I feel I would be unable to argue it well at this point (and also I value my relationship :slight_smile:

Anyway, she brought up an issue that she says free market supports do not take into account. She talked about institutional racism, a term I am not entirely familiar with. Basically she was saying that African Americans are still in a lower place in society because of the effects of slavery/racism. There are discrepancies in wages, prison population, and they are underrepresented in powerful positions. At this point I feel it is true that African Americans are generally still feeling the negative results of slavery and are disadvantaged because of it. However, I do not think that things such as Affirmative Action, hate crime laws, and civil rights laws are should be legal, and I do not think that they do anything other than make the situation worse and increase racial tension. It is her opinion that the government is not really doing anything to help, that existing programs do nothing and are just a way to let politicians say they are for equality. She thinks that we should be paying reparations to blacks, which I strongly disagreed with obviously (stealing from white people now who did not do anything wrong is not just). But, the question still remains – how would institutional racism/sexism be reconciled in the free market? Is it simply unfortunate that people are racist? Is it impossible for the government to make up for these disadvantages, or just impossible for them to do it morally (as in they could steal to fix it)? Or, is this simply not a real problem at all?

3) If we were to switch to a free market now, clearly not everyone would be on equal footing. I agree that people who have earned money deserve it, and those who have not do not. But, what about those who either gained financial power because of the current system (politicians, corporations who lobby the government), and those who have been exploited by the government (everyone, but I mean those who are poorer than they would be in a free market – for example small business owners who could not compete with government assisted monopolies, etc)? People would have unequal opportunity that is not their own fault. Is this a problem that would work itself out quickly, or at all? I can’t think of any fair way to fix this, but it seems unfair. Or is it fair because they made their decisions based on the current system and failed/succeeded?

That is all I can think of now, could anyone share their insights or point me to some information that would help me answer these questions? Thanks. Also, just ask me to clarify if anything is unclear.

2

What is not natural about the voluntary exchanges between individuals. In fact, in the free market one is more likely to see natural, pre state institutions becoming more prominent. Hence the reason that “anarcho capitalism” is also, and more accurately, known as the “natural order”.

That is nonsense, since property is a naturally arising relation between man and his environment for the purpose of dealing with the issue of scarcity. It is entirely natural. Even some animals have a concept of property, as pointed out to me some time ago on these forums.

No, it means that man isn’t perfect, that is our nature.

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It is possible to have governments, just, governments that compete for customers within a given territory.

As for the racism issue. The fact of the matter is that there have been plenty of other minorities oppressed throughout the history of the U.S. that are thriving and have, on average, higher salaries than whites. Blacks are not doing poorly because of slavery, or racism, blacks are finding themselves in prison and lower paying jobs because of various biological factors. For example, they usually have a lower IQ than whites. Also, they have adopted a mentality that the government owes them something, rather than working for it themselves.

Of course, that won’t go down too well with your average liberal. So it’s better off just parroting the line that the free market would cause business who discriminated to lose customers compares to those that do not.

As for racism, it depends on what you mean. It’s unlikely that without the state we’d see the “multiculturalism” we do today. Individuals of certain ethnic groups would be distributed into homogenous communities. Humans have a natural dislike for those different to them and a natural loyalty to those similar. Economic incentives, cheaper insurace, would make this more pronounced.

I’ll finish the post later.

3

1a) thats just slander. whether smith said it or anyone else. Obviously you didnt qoute any argument, so im left to classify the bare assertion as pure slander. regardless its never true that there are people without property. they are self-owners arent they? so by definition they have property. The only contradiction is a slave society, but that is only a society where the property rights of the slaves isnt respected. its not true that they dont have them.. moving swiftly on…

1b)

A related question - Does the fact that the free market need something to protect property rights/enforce contracts mean that it is not a natural system? And

what are the ways in which property rights are protected in a free market (is it possible to have government protect them and still have it be a free market?)

does the fact that your body needs white blood cells to enforce system integrity mean its not a natural system?

  1. on the free market, employer racial discrimination where productivity of the worker is overlooked for spurious reasons constitutes its own punishment. racially blind employers will utilize the productive labour which discriminators turn away and reap profits at the expense of the discriminators. its like a judge handing out a fine for discrimination, without the judge ! hurray!

  2. you make a lot of subpouints i wont address them all now, but the big one seems to be, what about the big winners of the state sapitalist system, isnt it unfair they should remain wealthy. well; financial power, reserves of capital will not self sustain. the mini and not so mini-oligarchs of our system with the stored wealth earned under statist capitalism will have to continiously prove on the market that they are good proucers good entrepeneurs good stewards of capital else they take losses and the capital switches to new better owners.

4

Besides the issue of Smith’s views (not knowledgeable enough on that to tell you), your professor is invoking the fact-value dichomity, and then apparently calling values, with the example of property given, as being “unnatural”, which is bizzare and nonsensical. I really don’t know what to make of that claim.

No, the market (more accurately, people interacting and exchanging freely) can protect property rights and contracts perfectly well on its own.

That is a difficult issue, and a real problem. On one hand, you have the fact that there are groups of people who have been oppressed and downtrodden historically, and who are often still suffering from the results of that. On the other hand, the solutions proposed by mainstream social liberals and state-socialists, including mandatory affirmative action and hate crime laws, are ineffective at actually changing things, and immoral to boot. The solution, as I see it, is to oppose institutional racism (and other injustices, for that matter) with every non-aggressive means at hand, including boycotts, social ostracism, and acting in a non-racist way in your everyday life. The use of aggressive force to rectify such offenses can’t be defended from a consistent libertarian standpoint, and will be less effective than non-aggressive measures anyway.

It is a problem that will probably work itself out, but there are several things that will speed it up. If someone’s property can be proven to be the result of their aggression (or someone else’s aggression on their behalf), they lose their claim to it, and it either should be returned to the original owner, or, if such an owner can’t be found or doesn’t exist, reverts to being unowned and open for homesteading. Also, vast tracts of government property (and that of the most statist corporations, including banks, the military-industrial complex, the “Big Three”, etc.) will be open for homesteading for anyone who wishes. That, plus the removal of statist privilege and restrictions, will vastly increase the wealth of the poor in a short period of time.

Hope this helps!

5

LOL, I had to chuckle at this. What you should do is make her say she is a liberal and then throw her a book by a real liberal like Frederic Bastiat. She won`t be able to say no, him being a “fellow liberal”.

Sorry for not adressing any of your points, but Im sure there will be others that will be glad to. Id just like to say on the racism thing that ours is the most consistant and “black friendly” stance. A lot of “liberals” will be in favour of all sorts of things they feel would benefit blacks, but then get upset when blacks stil do not come to resemble cosmopolitan liberals themselves but persist in their “ethnocentrism”. Well we don`t have such problems. When Malcolm X speaks about the need for nationalism among blacks* that is perfectly fine with us. We do not need to pretend he has gone insane for five minutes. Unlike the contemporary liberals we do not need everyone to think and feel like us.

*http://www.youtube.com/watch?v=TO6Co8v2XjY

6

Thank you all for your answers so far, especially on the race issue. I understood that employers paying black less than the value of their work would lose them to non-racist employers, but I saw a problem with the fact that they are generally more disadvantaged to start. Your responses helped a lot.

Also, I figured that the market would provide solutions for protecting rights, etc - I dont know why I needed to hear someone else say it. I would love any articles that describe what those solutions would/may be.

Also wombatron, is the fact-value dichomity a common issue or just a term you used? Are you saying that the fallacy is in saying “since it is not taken as a fact, it must be a value.”

7

The fallacy is a logical one. Trying to extract a value from a fact that has no value. This is a miracle, and no feat of deduction could accomplish it. However, a different ontology, i.e. one in which facts could be “pregnant”, so to speak, with values, would not pose this issue.

Regarding what your professor is saying, to be blunt, he is full of shit. He is saying property arrangements are a normative matter. This is true as regards their ultimate justification (keep in mind: any society needs SOME form of property arrangement, so it is natural in any form; he must mean private ownership in specific.) But economists can simply define private ownership as exclusive control over homesteaded or voluntarily acquired resources and proceed from there on to make their analyses (this allows them to be value-free.) Moreover. there is a sense in which private property is perfectly natural, in that it reduces conflict more than any other system does and induces cooperation insofar as man is a social animal, and unless your professor is a Hobbesian, there is no coherent rebuttal to this fact.

8

Is your girlfriend aware that some of the wealthiest, most influential people in the US are black?

9

yes, but I think she means it as a general rule, not absolute. As in, the average black person is disadvantaged compared to the average white. She also feels that this disadvantage is because they are black. While I dont agree with this view, nor do I see any fair means of fixing it if I did, I do not think it comes from mere ignorance as you seem to imply :confused: (maybe ignorance of the laws of economics, but it is largely a difference in morality).

10

what other opinions would you need to add in to change the characterisation of her qouted opinion from being ‘liberal’ to itself ‘racist’?

11

What biological factors would those be? Also don’t you think the high population of blacks in prison has anything to do with drug laws, minimum wage laws, etc.?

12

I said already.

Perhaps to an extent, but last time I checked they are no minimum wage laws for blacks.

13

The drug laws and minimum wage laws are universal but whites don’t have the same rates of unemployment or imprisonment, so obviously there’s another factor involved. The Marxists say institutional racism. I say low IQ and high testosterone. And it’s not just vice non-crimes. They are six times more likely to commit violent crime. Everybody knows this, even white Marxists, who live in white areas of town and are careful to associate only with high IQ blacks.

14

You don`t have to have a high IQ to stay out of jail or get a job.

Fact is drug laws and minimum wage hurt different segments of the population to a different extent. Too bad we don`t have poor Jewish people in the slums anymore to be able to compare.

15

Uh, yeah. And amazingly, there weren’t such things as laws saying Jews couldn’t be discriminated against, you had to give out x amount of government contracts to Jews, lower test scores could be considered because the test takers were Jewish, etc., yet they were out of poverty within a generation or two. Same with the Irish. Same with the Italians. Same with the Lebanese Christians. Same with the Chinese. Same with, well, just about everybody.

Now how could this be? It’s a mystery, a paradox, a conundrum …

16

Amazingly enough when they did it the state was far smaller than it is today.

To prove IQ has anything to do with you would have to prove high IQ blacks tend to stay out of prison and low IQ blacks tend to end up in it.

17

Of course. Because the ‘justice’/prison system is controlled by white , racist people.

18

These is easily resolved. “Honeybun, would you… murder me if I don’t want to give up my property in a communist regime?”

If yes: time for a break up.

if no: Huggerz and hand her a copy of Hazlitt’s Economics in One Lesson.

19

And?

Say Thomas Sowell as opposed to the average black guy in prison?

20

What, exactly, do you see the State doing to hinder the advancement of blacks in the private sector?

And have you ever been to a prison? I can promise you that the blacks in it have lower IQ’s than the blacks out of it.

Intelligence and impulse control are related. Criminals have poor impulse control because, well, they’re dumb. Now, I know all the criminals are evil geniuses on TV and of course there’s the outliers like Bernie Madoff, but really, they are mostly high time-preference, low IQ individuals who can’t get jobs because they can’t keep their impulses in check. Population groups that show a bulge to the left of the curve are going to be disproportionately represented in prison populations.