Markets are not perfectly competitive and they are not free. Even if they were perfectly competitive, they would not be free. In his iconic Economics textbook, Paul Samuelson says there are no perfect competitors “except possibly the millions of farmers who individually produce a negligible fraction of the total crop.” But even those farmers are not free to go out at night and burn their neighbors’ crops down. There are rules.
Everyone agrees on the need for rules of lawful behavior. The policy discussion is about what behavior should be lawful and what should not. On this we do not have agreement. “Free market” generally means freedom to do what the individual or group invoking it wants. For Mitt Romney, it meant freedom to emit carbon but not to set up banks in garages.
“As president, Mitt Romney will eliminate the regulations promulgated in pursuit of the Obama administration’s costly and ineffective anti-carbon agenda.”
“You can’t have a free market work if you don’t have regulation. As a businessperson ... I needed them there. You couldn’t have people opening up banks in their — in their garage and making loans.”
While what people call free varies, the symbolism they are invoking does not – free means good. Fossil fuels freely discharging carbon is good – taking account of their accumulating long-term harm would reduce the rewarding near-term benefits of extraction and use which the market offers. “Let the market deliver” will carry the day until the costs become too obviously big to disregard, at which point free-market talk will be abandoned as the purely rhetorical flourish it is. Alas, too obviously big can be phenomenally big. See for example too-big-to-fail systemically important financial institutions, which gave us the great recession and are now bigger and riskier than they were at the outset. Whether fossil fuel industries can fend off unwanted rules to the same extent as Wall Street has remains to be seen. What is clear is that both finance and energy are capable of producing history-making events of a scale sufficient to blow free-market rhetoric off the map.
Of course well-functioning markets are good at what they do. Here is Samuelson again, speaking about (pre-Sandy) New York City.
“How is it that 12 million people are able to sleep easily at night, without living in mortal terror of a breakdown in the elaborate economic processes upon which the city’s existence depends? For all this is undertaken without coercion or centralized direction by any conscious body!”
But market goodness comes from competition and pricing that are made as perfect as possible, not as free – i.e. lawless – as possible. Shorthand use of “free market” as a standard of goodness is cant by some, carelessness by others. A more accurate term would be “free-fire market” or “fray market,” – the victor-gets-the-spoils economy unraveling at the seams and edges. Free market has long been a successful battle cry for a small group of winners. For everyone else in the market, freedom’s not just another word. It’s two words.*
*Think Janis Joplin and homophones.