The Virtues of the Free Market
The much-maligned “aimless” system confines the worst of our nature and habituates us to virtue.
Imagine a customer standing in line at a store. He is next in line and notices a “Biden 2020” hat on the owner’s head. The customer, who strongly dislikes Biden, is thinking of shopping elsewhere. Instead, he realizes that doing so would be too much of a hassle. So, he purchases his items, smiles, and says thank you.
Imagine the owner sees the customer standing in line at his store. He notices a “Trump 2020” hat on his head. The owner feels the urge to kick him out of his store, but he realizes that doing so might drive out other customers from his store and could lead to a boycott. So, the owner checks him out, smiles, and says thank you.
What happened? What separated the customer from yelling “F*** Joe Biden,” and the owner from yelling “F*** Trump”? Under any other circumstances, the F-bombs would likely drop. But here, in a free exchange, the customer and the owner chose to be kind to one another.
What fostered this restraint of vile behavior and promotion of virtuous behavior? It was none other than the free market.
The free market is usually misunderstood and mischaracterized by many, so let’s define it.
The free market, what we usually call “capitalism,” is an aimless system of people freely trading property and labor. It is aimless because it is not a unified whole with collective goals, nor does the government attempt to impose collective goals on the market. The government does not control the way people trade, nor does it set an arbitrary value on property and labor. The free market consists solely of the aims of single individuals. The government is limited to protecting those participating in the market from threats to their life, liberty, and property, and providing mechanisms for enforcing agreements freely made in the market. The free market is, as Friedrich Hayek called it in The Fatal Conceit, a spontaneous order — an interconnected network of people exchanging without coercion or centralized planning.
This aimless system teaches us virtue through securing the value inherent in the system itself: the value of consent. And from consent derives respect because consent is only possible if two people respect the rights and dignity of one another.
Consent is at the heart of all transactions; it is only possible if the customer and the owner respect each other’s rights. In the above example, despite the prejudices the two had for one another, they realized that the transaction was more important. The customer, who respected the owner’s right to refuse his service, felt obligated to exercise the virtue of kindness to receive the owner’s service. And the owner, who respected the right of the customer to take his service elsewhere, also felt obligated to exercise the virtue of kindness to receive the customer’s service. A free market makes such kindness second nature — a habit we do by default.
Partisan prejudices are not the only kinds of prejudices that are mitigated through free market exchanges. All prejudices, from racism to homophobia to classism can be mitigated when people feel obligated to be kind to trade partners of different races, origins, or ways of life. Or, at the very least, such prejudices become socially unacceptable in public. So, those of you on the left who think the free market is a white supremacist system that encourages prejudice and must be uprooted should seriously reconsider your position.
Kindness is not the only virtue fostered by the free market. The market also encourages frugality or temperance with one’s own money. Of course, anyone in a free market is free to be profligate, but the government will not be there to help or provide welfare when they are poor or living on the streets. Acknowledging this reality in a free market, in which you enjoy only the fruits of your own labor, creates the incentive to think about your future instead of pursuing short-term pleasure.
The free market also fosters patience, diligence, and humility. Think of your first job. You were probably young and wanted some extra cash. So, you applied for a low-paying job that required a lot of work. The low pay and long hours teach you the value of a dollar– diligent work and patience are required to receive the money you earned. And the humility lies in acknowledging that your credentials are limited and in accepting, for the present, a low-status job. But when the government raises the minimum wage, which interferes with the mechanisms of the free market, we become less familiar with the actual value of the dollar, and the number of low-status jobs shrink.
Market success also requires the virtues of prudence, fortitude, and ingenuity. Anyone who runs a business knows that they have plenty of competitors hoping that the business fails, so they can take the customers. To ward off competition, it is necessary for the business to come up with creative and bold ideas. But the ideas must also be prudent, because if they are too creative or too bold, the business risks losing customers. Yet, when the government begins to interfere, the regulations have the net effect of favoring established business over new competitors. The established businesses no longer have to be bold, prudent, or creative because the regulations are taking out their competition. Less connected businesses can be completely shut out from the market, no matter how bold or creative they are, by regulatory capture, meaning their erstwhile competitors can be as staid and feckless as they please without any consequences.
So, the free market, properly understood, does foster virtue, specifically kindness, patience, diligence, humility, prudence, fortitude, and ingenuity. Of course, men can develop virtue in any society, with or without a free market. But, to ensure the maximal number of people are virtuous in society, it is necessary for society to actively encourage virtue. The free market is not perfect, but it is undeniable that it is not only a school of virtue, but it makes virtue habitual and imprints it on man’s soul.
Originally published at https://www.thetexashorn.com on April 1, 2022.
