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Friday, October 29, 2004

Basic Market Ethics

People need a set of guiding principles to help them decide difficult political questions. My guiding principles have to do with market ethics. If some action would violate basic market ethics, then I can be sure it is the wrong action.

For thousands of years man has been improving his well-being through the action of the marketplace. All great cities developed to promote trade. The rules of trade are what I call the ethics of the marketplace. The rules are few and simple. Here they are.

Buyers and sellers come together in the marketplace of their own free will, motivated only by self-interest. Buyers and sellers decide on price, which may change with time and place. No force, coercion, or intimidation is allowed in the marketplace. No one must buy or sell anything they don’t want to, for any reason. Everyone is free to come and go from the marketplace at any time. When a transaction occurs, it is because both buyer and seller believe it is to their own advantage.

The two groups of people who do use force in the marketplace are robbers and government. It is the government’s job to remove robbers from the marketplace, using force if necessary. On that we can all agree. It is when government uses force on the peaceful buyers and sellers in the marketplace that the controversy begins.

Today our government uses a lot of force on the peaceful buyers and sellers in the marketplace. For example, it uses force to set prices (minimum wage and rent control). It coerces some buyers to buy (mandated insurance like social security and workers’ comp). It coerces some sellers to sell (civil rights ban on discrimination). It prevents some transactions from taking place (insider trading and child labor laws).

If you carefully examine each case where government uses force in the marketplace, you will find that government force is not beneficial to society. In each case, market ethics are a reliable guide to proper action. That is why Adam Smith recommended in 1776 that government adapt a policy of laissez-faire. What to do about the marketplace: leave it alone.