Acton Institute Powerblog

Free Markets Are Necessary But Not Sufficient

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necessary-sufficientTo be a champion of free markets is to be misunderstood. This is doubly true for free market advocates who are Christian. It’s an unfortunate reality that many of us have simply come to accept as inevitable.

That doesn’t mean, however, that we don’t attempt to clear up misunderstandings when we can. So let me attempt to clear up one of the most notorious misunderstandings: Few advocates of free markets (and none who are Christian) believe that free markets are a sufficient condition for human flourishing. We believe they are a necessary condition, but they alone are not sufficient.

Economist Donald J. Boudreaux (who, for what it’s worth, is not a Christian) explains:

To understand the limits of economics is to avoid the error of assuming that economic success requires only that monetary incentives — prices, wages, profits, rates of return — be correct. Tariffs, minimum wages and other government interventions that distort monetary incentives do indeed make economic performance worse than it would be otherwise. But the success of even the freest market requires that people respect each other’s property rights, that people keep their promises and that people behave responsibly toward their family, friends and own future selves.

A society dominated by adults who never look beyond today will never become wealthy, no matter how free the market might be.

If the culture says “Live only for today!” then too few people will reduce their pursuit of immediate pleasure; too few people will have the discipline to sacrifice today’s certain pleasures for the always-uncertain prospects of a brighter future.

Markets that are at least reasonably free are a necessary condition for prosperity. But free markets are not a sufficient condition. This fact is why deregulation alone or free trade alone or tax-cutting alone should not be expected to spark and sustain widespread economic growth.

The case for free markets presumes the existence of a culture that encourages people to care about their families and their futures and that discourages people from looking with scorn upon entrepreneurs and merchants. Under these cultural pre-conditions, prosperity will indeed occur if markets are free.

You might believe this is obvious, but you’d be wrong. I agree that it should be obvious, but almost every critic of free markets presumes that when we argue for economic freedom we are saying that liberty is sufficient, and not merely necessarily, for flourishing.

The reality is that without a moral culture that produces virtuous individuals, free markets will not — indeed cannot — lead to true human flourishing. This is why one of the Acton Institute’s Core Principles is that, “Liberty flourishes in a society supported by a moral culture that embraces the truth about the transcendent origin and destiny of the human person. This moral culture leads to harmony and to the proper ordering of society.”

It is important that we correct our critics about this misunderstanding between necessary and sufficient causes. But it is even more important that we advocates of free markets never get confused about the difference.

Joe Carter Joe Carter is a Senior Editor at the Acton Institute. Joe also serves as an editor at the The Gospel Coalition, a communications specialist for the Ethics and Religious Liberty Commission of the Southern Baptist Convention, and as an adjunct professor of journalism at Patrick Henry College. He is the editor of the NIV Lifehacks Bible and co-author of How to Argue like Jesus: Learning Persuasion from History's Greatest Communicator (Crossway).

Comments

  • Philosophical Actuary

    Many excellent points Joe. However, free market advocates need to also realize the limits of the necessity of free markets lest the err in excess. What is necessary for flourishing are most basically the means of survival then additionally leisure and the best activities concomitant with that. Free markets are probably the best means of providing this for the majority of humanity, but it is not strictly necessary. If it were monastic (particularly cloistered and secluded) communities would not see/have seen human flourishing, but they have and do.

    • In a free market, people can pursue their own vision of flourishing. Of course, many will fail because they aren’t based on the Bible. Socialism is similar to outlawing all forms of flourishing but the monastery.

  • Dylan Pahman

    Just a minor quibble: That graphic seems to be backwards. In the top image, A includes B. Thus A is sufficient for B. In the bottom image, B includes A, thus A is necessary for B but not sufficient.

    • Philosophical Actuary

      A is necessary for B = If not A then not B. In the top image, B cannot obtain unless A does. Human flourishing (B) cannot obtain without free markets (A) obtaining, though flourishing may not obtain (not B and A).
      A is sufficient for B = If A then B. In the bottom image, when A obtains B does as well.
      Though I think you are interpreting the circles as the entire circle obtains rather than the circles representing an event space where any point in the circle may obtain. Hence A obtains would mean the whole circle obtains rather than a single point in the circle.

      • Dylan Pahman

        Ah yes, that makes sense. I did take it in that latter way.

  • “every critic of free markets presumes that when we argue for economic freedom we are saying that liberty is sufficient, and not merely necessarily, for flourishing.”

    That’s because they’re dishonest. They also assume that we want no laws respecting property or life. Capitalists tried to dodge the lies about capitalism that socialists had fabricated by talking about free markets. They invent the same lies about libertarians and conservatives. It’s easy to tell when a socialist is lying: his lips are moving.

    Free marketeers emphasized free markets because that was the main point of attack from socialists. But as Deirdre McCloskey has shown, free markets without respect for business and the bourgeois virtues won’t go anywhere.

    Freedom allows everyone to pursue what they think is flourishing. That is going to be different for atheists and Christians, Jew, Hindus, and Muslims. As long as they don’t infringe on the rights of others, each can pursue his own version of flourishing. As Philosophical Actuary wrote below, they can be monks if they want.

    The state should not dictate to citizens one definition of flourishing.

    • Clark Coleman

      You are missing a key point of the article. If a society is composed of people who define “flourishing” in terms of today only, it will not flourish in the long run. The article does not agree that each person can define flourishing in any arbitrary way and have a positive outcome for society in the long run. This point is a key difference between conservatism and libertarianism.

      • “The article does not agree that each person can define flourishing in any arbitrary way and have a positive outcome for society in the long run.”

        I don’t think I said that it was the point. I was just making the point that freedom allows everyone to pursue their vision of flourishing. Obviously, some are wrong and people will fail. As a Christian I recognize only one way to flourishing. But at the same time Christians have no right or authority from scripture to dictate the Biblical means of flourishing and jail people who don’t agree.

        • Clark Coleman

          OK. You seem to be going off on a tangent that has nothing to do with the article. You are the one bringing religious coercion into the discussion. The article states that Christians and even non-Christians agree that free markets are necessary but not sufficient for human flourishing. Nowhere was it suggested that a Christian view be imposed on anyone. Why you going off on a distracting tangent, I have no idea.

          • Pardon me! I didn’t realize you are the Gestapo for posters on this blog.

  • Philosophical Actuary

    A question I have is in what ways have free markets contributed to moral decay and are there aspects essential to the free market hat are contrary to the human good. Also I wonder what would happen to the economy if even all Catholics took Lent with the utmost seriousness and penitence.

    • “…in what ways have free markets contributed to moral decay…”

      That is the atheist/socialist perspective on morality, which most Christians have embraced. Until the French enlightenment no on thought that a system of government could influence morality. Christians had for 1800 years held to original sin, people are born with a tendency to evil. Some resist that better than others. The family and church had some influence, but free will put the individual in control of their moral choices. All the state could do was jail people who broke the law.

      Atheists/deists/socialists in the French enlightenment came up with something never heard of before: they insisted against all evidence that people are born good and turn bad only because someone oppresses them and property is the greatest oppressor. It elevated envy to a virtue. From then on, even Christians began to think that the state or the “system” could perfect human nature through education, legislation and equalization of wealth.

      Capitalism encourages the bourgeois virtues, as Deirdre McCloskey emphasizes in her trilogy by rewarding those who embrace the bourgeois virtues with financial success. But even for economic growth to happen and standards of living to rise, Christianity had to suppress envy. I wouldn’t say that capitalism improves morals. That would reverse cause and effect. I would say that morals had improved as a result of the spread and depth of Christianity in the 16th century, especially the suppression of envy, and that made capitalism possible. Capitalism doesn’t improve morals, good morality makes capitalism possible.

      • Philosophical Actuary

        Broken human nature tends toward evil. Freer markets give more freedom for wicked men to spread their wickedness by tempting especially weak men of which there are many. Therefore, freer markets contribute to moral decay.

        • No, free markets offer less freedom for wicked men. The state has the job of protecting people from wicked men who would steal, defraud, enslave, or murder. Competition forces wicked men to serve their consumers or risk losing them to competitors. Free markets handle most kinds of evil well. They can’t handle envy, however. Envy destroys everything. Socialism elevates envy to a virtue. Only Christianity has proven to have the power to suppress envy. Without Christianity, envy controls and destroys everything.

          • Philosophical Actuary

            Competitive forces are of no avail when wicked men /tempt/ weak men into wickedness. Competition has the effect of increasing the supply and decreasing prices making wickedness easier for weak men to obtain and to fall into. Therefore freer markets and competitive forces contribute to moral decay.

          • In the first place, you have it exactly backwards. Men are wicked first and then take advantage of others if society allows it. As I wrote, the state’s job in capitalism is to punish those who break God’s laws. So if the state is doing it’s job, wicked men can do little harm.

            So how does “increasing the supply and decreasing prices making wickedness easier for weak men to obtain and to fall into”? That’s an absurd connection. It’s the non sequitur fallacy. If you’re thinking of vices like drinking and drugs, then you should know that price has very little to do with them. Studies have proven that people are very insensitive to prices for those products. Had you ever studied the poorest countries on the planet you would know that drugs, alcohol, cigarettes and prostitution are more common in them than in the West.

            You seem to be stuck in the socialist/atheist paradigm where society determines morality. Again, the Biblical perspective is that individual morality determines the character of society. Capitalism does not make people moral; it requires moral people to exist. Socialism doesn’t make people immoral. Immoral people consumed with envy choose socialism so they can vent their envy to the extreme.

  • DLink

    Problem is that truly free markets are quite rare though they are simply defined. It is merely a transaction, freely entered into, by a willing buyer and a willing seller. Unspoken, but a necessary adjunct, is that the transaction does not violate the seventh and eighth commandments. Properly understood, they are quite sufficient. Unfortunately, there are always those who seek to bend or even break the rules, in an effort to make transactions conform to what they believe is “fair”. You will find most of these people in the academy or government.