Free Market: What Can It Mean?

The New York Times editorial (Dec 30, 07) entitled “Free Market: A False Idol After all,” contains the following quote:
“Every regulation reduces people’s freedom,” said David R. Henderson, a libertarian economist at Stanford University’s Hoover Institution. “The more regulation we get, the worse we do.” Who is the “we” referred to here?
Pitting the free market vs. the non-free market is a misleading conception. All markets begin with a distribution of property rights to be exchanged. Regulations are simply somebody’s property right and opportunity, and somebody else’s exposure to that opportunity. For example, a workplace safety regulation simply says that workers own the right to be free of certain hazards. Henderson uses an undifferentiated “we” that ignores the fact that freedoms of people with different interests conflict. Or as Isaiah Berlin put it, “Freedom for the pike is death for the minnow.”
A safety regulation functions no differently than a land owner’s property right. It is an asset for a worker just as is his human capital made valuable by regulation of slavery. It is part of what is antecedent to market trading. It says who has what to trade. If you do not want to live in a world that is the outcome a particular set of property rights, change the rights and a different outcome will be forthcoming. The market is not the culprit— it is the fact that some people have all of the rights. You need not oppose free markets, rather oppose the particular rights that account for the performance you want to change. Rights get changed by legislation and by court rulings.

By the way, slave owners argued against the abolition of slavery as an offense against freedom. To be honest, they should have said that regulation of slavery reduced plantation owners’ freedom and enlarged the freedom of former slaves. It draws attention away from the real issues of the distribution of property rights to cast the choice as free market vs. regulation. The false idol is not the market, but the particular market rules that produce a particular performance of the economy.