Economic Choices and the Evolution of Mixed Market Systems
Many argue that free-market economics is merely an experiment in capitalism, with the belief that it would evolve differently if workers and consumers had more freedom of choice. However, the reality is that capitalism is not an experiment but a natural outcome of human choices and the absence of government interference. While free market economics provides a framework for understanding market behavior, it is not a policy itself.
Capitalism as a Natural Outcome
Capitalism is the result of individuals acting freely and without government intervention. Free market economics explains how these individuals interact and create a self-organizing system often referred to as free-market capitalism. When governments allow economic agents to make choices and secure their property, a capitalist system emerges. This system is not an experiment but the result of the decision not to interfere. It is a mix of various economic approaches, reflecting the choices made by governments and individuals.
Understanding Free Market Economics
Free market economics is the study of how free markets function. It is not a policy but a framework for understanding market behavior. The decision to let markets develop without hindrance is a policy decision. For instance, deciding whether to let students choose their own seats in a classroom can be an experiment, akin to the decision to let markets operate freely. These decisions significantly influence the economic landscape.
The Evolution of Economic Systems
Every industrial and post-industrial economy is a mix of at least three different economic approaches: socialism, capitalism, and corporatism. Socialism is characterized by government ownership and control, exemplified in sectors like the military, police, highways, and the post office. The 1930s and 1940s saw a trend towards greater socialism, particularly in military support.
Capitalism is evident in industries like AOL, Myspace, Facebook, and Google, where competition is relatively unrestrained. Since the post-World War II era, corporatism has been increasing in the United States at the expense of both capitalism and socialism. Socialism in prisons and the corporatization of health insurance and government programs, particularly the Affordable Care Act (ACA), Medicare, and Medicaid, are examples of this trend.
Freedom of Choice and Government Interventions
It is often claimed that workers and consumers have freedom of choice. However, when a significant portion of the fruits of labor is taken by the government—45 to 47 percent of a middle-class person's earnings before they even see it—such freedom of choice is severely limited. Similarly, government interventions in healthcare, such as the ACA, often reduce consumer choice, failing to allow individuals to retain their preferred doctors. These interventions alter the mixed economy, turning it predominantly corporatist.
Every economic decision, whether by governments or non-economic decisions, can be seen as a reflection of which economic approach should expand and which should contract. The current state of the economy reflects the balance between these three approaches.
Understanding the evolution of economic systems and the choices that shape them is crucial for navigating the complexities of modern market dynamics. By recognizing the role of free-market economics and the limitations imposed by government interventions, we can better understand the direction of economic progress and the future of capitalism.