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Liberals have been quick to tell us that the financial problems at Enron and Worldcom show that our economy needs more government regulation. The liberals say that free markets are dangerous because they are based on greed and are therefore prone to "fail," leaving us hungry, naked, and cheated. What the liberals say is a carefully manipulated half-truth, and it is worth taking a minute to understand why they are wrong. The fall in the stock price of Enron and Worldcom is not evidence of a market failure, it actually shows that markets work. Had the market failed to detect that these companies were engaged in deceptive practices that made them appear to be worth more than they were, and had the market failed to stop the companies from operating in these deceptive ways, that would have been a real market failure. Instead, the fraud was detected and revealed, and "the market" - meaning all of us, acting on the information we have to decide how much we are voluntarily willing to pay for something - responded by reducing the stock price of both companies. We - the market - disciplined the liars and thiefs by reducing their value, and more discipline will be applied when they are prosecuted under existing laws. But the market discipline was applied without the cost of investigation by a regulatory agency, the delay of a trial, or the circus of Congressional hearings. Why do markets work? Are they really based on greed? The truth is markets work because God has made us in His image - we are self interested, meaning we are concerned with our own welfare. God relies on this characteristic when He commands us to "love our neighbors as we love ourselves." Because we are self-interested, we work hard to benefit ourselves and those we love and we try not to waste anything. Laziness and inefficiency are both sinful. And like all sin, they leave us worse off. We alone know what talents and interests God has given us, so we alone possess the information to decide what something is worth to us. Because God has made us all unique, we value different goods and services differently. It is these differences that make the market work. Those who value something more than it costs will buy it. Those who value something at less than what others are willing to pay for it will sell. So what is the difference between self-interest and greed? Self interest wants the most for self, but does not want to violate God's rules - like don't lie or steal - to get it. Rational self interest knows that those things gotten by violating God's rules always cost more than the benefits they produce. Greed is covetousness, it wants what others have and does not care what means it uses to obtain it. So liberals are wrong, markets are based on self interest, not greed. But liberals are correct that greed will destroy markets. If people lie, we won't have accurate information to decide what something is worth. If people steal, we won't reap the rewards that our honest labor deserves. Now here's the problem, markets work because we love ourselves and take care of ourselves. They're not perfect, because it takes time to collect and disseminate the information on which valuations are based. But the only alternative to taking care of ourselves through markets is to let somebody else take care of us. When liberal politicians say the market needs regulation what they are really saying is we are too stupid to take care of ourselves so we ought to let them take care of us. We have already told the liberals - through the Constitution - that they don't have the authority to "take care of us" with their economic regulation. Both free markets and free governments depend on self interest. Free markets work because we can punish those who want to cheat us by offering to pay less or buying from the competition. Free governments work because when one group of politicians or branch of the government attempts to cheat us, other politicians or a coequal branch of government have a selfish interest in stopping them. But economic markets work much better than political markets. In economic markets we can gather information ourselves by inspecting goods and take action ourselves by bidding a lower price. In political markets, our only source of information is often the politicians themselves, and we must rely on our agents - other politicians - to take action on our behalf. For this reason, our Constitution does not allow government to regulate the market, it simply requires that government punish lying and stealing. Our Founding Fathers carefully guarded our property rights and made no provision for the things that we own - be they the clothes on our back or corporations - to be controlled by politicians. We label governments who interfere with property rights as socialist or communist. They're easy to spot - they are the nations where the people are poor and to get ahead you must curry the favor of the rulers. Liberals have already succeeded in intervening in our economy more than the Founders ever intended. If they use Enron and Worldcom as an excuse to take more political control of the things we own, how will we protect ourselves from their greed? |
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