What happens when Reality and the Free Markets clash?

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The most common theme one finds when listening to free market proponents is how they (the markets) are the only way to judge what is valuable to someone. The way to discover that is simply to see if someone is willing to pay money for something. As long as someone pays for it, it is understood that it was valuable for that person. It provided a utility.

I always found this implication flawed but I couldn’t really put my finger on the why. Until today, where a post on the growing popularity of alternative medicine came to my attention. This immediately presented me with an example of the obvious contradiction between what the markets consider as valuable or useful and what truly is.

For any skeptic, alternative medicine and other woo-woo are obviously worthless, not only do they not provide any health benefit (over the odd placebo) but they can be overall harmfull by making people avoid taking scientific medicine and reducing the funds and thus the research that would have otherwise been spent on scientific research. These effects are already obvious today, as the article above points out.

But for the free market proponent, it must be obvious that complementary and alternative medicine (CAM) provide value since people are paying for them. And the more people pay for them, so goes the thinking, the more valuable must they be. And more so than anything else, the CAM success is based on deregulation of the medicine industry, allowing the free market to define what is useful rather than the experts.

The rise of CAM popularity then aptly displays where the free market mentality directly contradicts reality. CAM do not provide any value1 and yet they are rewarded by the free market as if they did.

Ans this is the complete failing of the free markets where any and all value is decided on a truly subjective basis, lacking overview or foresight. Because they deny that objective ways to judge value exist, they can easily lead the world to become a worse place. And this is not only limited to medicine but to almost anything esle which can be decided via the markets.

Lets take another example: Coal and Oil VS renewable and clean energy. While we can objectively see that using the former types of energy creates major environmental problems, the markets judge oil and coal as more valuable. The result? (Too) Many free market proponents are Global Warming deniers.

When Reality and Free Markets clash, it is the later which we are told must heed.

However one question remains. What is causing this problem? Would this be resolved if people simply followed scientific evidence? If people learned to trust in the scientific method, wouldn’t the markets represent that view? And herein lies the problem. Money.

The reason why the objective reality fails to be represented by the markets is because it is not reality that drives them. It is money. It is not reality that drives businesses. It is money. The main ingredient for the use of the free markets is the one that distorts the whole recipe.

Money is what that allows people to avoid starvation and cold. Starvation and cold are of a higher priority to humans than ideology. So when a human is faced with the choice of lying or starving, it is obvious what they will choose. Thus people will lie and misguide others in their attempt to make money. They will use scientific-looking evidence to muddle the waters for most humans. They will use the money that they make to hammer on, with more and more advertisements and misdirection. As long as there’s money to be made, it’s worth it.

It is not reality that rewards (with money) the valuable actions. It is money that distorts reality.

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  1. This post is not going to be about proving that CAM don’t work. I assume that this is understood by skeptics and I will not argue this point. If you’re a free market AND a woo-woo proponent then all hope is likely lost for you []

7 thoughts on “What happens when Reality and the Free Markets clash?

  1. I think you're mistaken here. You're conflating scientific truth with subjective use-value. Not even capitalist economists assert that market value measures scientific truth in any way.

    The problem here is not in markets per se, but as you note in your comments, how tying political power to ownership of capital encourages certain kinds of lies and bullshit, just as previous class-based societies encouraged their own kinds of lies and bullshit.

    1. You're conflating scientific truth with subjective use-value.

      I'm talking about objective use-value, of which CAM has none compated to subjective use-value which is defined by the markets. The Free Marketeers would have us believe that the Markets, left to their own, will distribute wealth to those that provide the most value to society and that therefore this value must be considered the only one worth consideration. I attempt to strike thus at the general misconception that I notice many Free Marketeers propagating, that the chaotic and vast nature of the Markets can define the only possible use-value, the subjective. The objective is only worth consideration inasmuch as it changes the distribution of subjective value, in the sense that a propaganda technique can do so as well.

      I hope I make sense 🙂

      1. I'm talking about objective use-value, of which CAM has none compared to subjective use

        I understand. And I'm saying that I don't know of any capitalist or "free-market" proponent who makes the claim you're rebutting.

        The Free Marketeers would have us believe that the Markets, left to their own, will distribute wealth to those that provide the most value to society and that therefore this value must be considered the only one worth consideration.

        This is a different claim. There is no need to read "provide the most value" as "provide the most objective value"; the claim still makes sense even if it explicitly means "provide the most subjective value".

        Of course, the claim is theoretically wrong. A free market does not distribute wealth to those that provide the most value. A free market delivers wealth to the consumers of goods, by driving prices down to the true cost. (Or, in some circumstances, driving the cost up to the use-value). A free market never specifically and exceptionally rewards the producers of any kind of value, subjective or objective.

        The only real correlation between a free market and any kind of value is to set an upper bound: the cost of an item in a free market will never exceed its use-value.

        1. This is a different claim. There is no need to read "provide the most value" as "provide the most objective value"; the claim still makes sense even if if it explicitly means "provide the most subjective value".

          Perhaps it's only my experience but I've seen often enough Free Marketeers make this "equivocation". And they're not limited to economics either but continue with this mentality to other philosophical observations, as did, for example, Rothbard with his observation of why women were not interested in politics.

          Perhaps you are right, and not many claim anything of the sort. In that case then my argument would point out that there's little connection between what the free markets reward as useful and what really, objectively is, which imho is still a severe shortcoming.

  2. I don't know how popular that would be. Lacking advertisers to muddle the waters and greedy scammers who would gladly confuse people for their benefit, I think that the popularity of CAM would be severely diminished

    1. I've run into many people who promote CAM and other pseudo-science while not benefiting from its promotion in any monetary sort of way. In my experience, people who by CAM products because of advertising generally do so because they are tricked into thinking the product has scientific backing, not because the advertising convinces them of the underlying theories (and I use that term loosely) behind CAM. Taking away the potential to profit from CAM will decrease the number of those tricked into buying it, but the believers will continue to seek it out regardless.

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