A Utilitarian Defense for Free Markets

Mr. Marcks was looking at a piece of property where he could have placed his small flower-selling business, but now the place was filled with construction workers and heavy machinery. He had been outbid when trying to purchase the property; there was no way he could have made a profitable business paying that much for it — even though the site was perfect.

The big industrial corporation now owning the property seemed to have a never-ending stack of cash. It simply wasn't possible to outbid them; they had easily paid a lot more than Mr. Marcks and his fellow small-scale entrepreneurs in the Multiple Business Syndicate could ever accumulate, and "won" the site. Now the corporation had employed a hundred construction workers building another factory-in-a-shop facility.

Should it really be this way, he wondered. Don't I have an equal right to put my business at an attractive site, shouldn't I have a right to the same opportunity Mr. Bucks, the owner of the corporation, once had had. I deserve a break, Mr. Marcks concluded, we all do.

To anyone in the statist left, this story would be a typical example of the injustices of the market. Mr. Marcks and his fellow syndicate entrepreneurs are obviously "forced" to locate somewhere else since they cannot compete financially with the big, immoral business of Mr. Bucks. This is, they would say, how capitalism works: they richest takes it all, while all others are left behind and have to play by the wealthy's rules.

(The statist right, on the other hand, would probably take an opposite position and demand laws to protect Mr. Bucks's "right" to be wealthy, and call for subsidies to make sure he stays that way. At taxpayers' expense, of course.)

The thing is Mr. Marcks, despite his name, doesn't necessarily have to be a leftist. He could be anyone who has been "outbid" — anyone wanting something they cannot purchase simply because someone else had more money to offer. The conclusion people generally make from a situation like this, just like Mr. Marcks, is that it is unfair and cannot be right. Everybody intuitively feel they should have an equal right, and so they feel stepped upon by anyone with more money — and perhaps treated unfairly.

I know a lot of people who would rather not think about buying a scarce commodity, or the perfect property for a beautiful summer cottage, than take part in a bidding together with people with a lot more money. They gather they would stand no chance — that they would lose no matter what. But the thing is, their logic is limited in the same way leftists' logic is. They prefer thinking in one step only, instead of seeing things in a context.

Leftists prefer the "snapshot" view of society, where they anytime can stop the course of time and compare people's wealth in order to conclude it is "unfair" (meaning unequal). They prefer not looking at things the way they happen and are brought about, i.e. as processes. There is no one making investments for the sake of investing, but rather for the sake of expected returns and profits. Leftists enjoy analyzing their snapshot view when someone has worked hard all his life and managed to satisfy a lot of people's needs through providing employment and products and so become wealthy.

When thinking about it, what is unfair is really the way they see things and how they analyze the "unfair" state of affairs. How can you judge someone for his temporary wealth without taking into account his achievements the passed decades? I am not saying all wealthy people have earned it. Contrarily, I think a lot of people have become wealthy through gaining political privileges. But that certainly does not apply to all of them.

The reason people can get wealthy is that resources are scarce, and that's the reason we have an economy in the first place. In a free market the people creating most value for others receive most value in return. That's why Murray Rothbard stated "[t]he greater a man's income, the greater has been his service to others" (Power & Market, p. 224–225). The natural conclusion from this, at least from a utilitarian perspective, would be that he who can produce most value for others should have a right to the resource.

That's obviously not the way leftists think — to them, it is more important to have equal wealth than to have more wealth. People are obviously thought better off equally poor than unequally wealthy.

But that doesn't change the fact of things: resources are scarce and people in general are better off if they are used creating a maximum of output. It is, to humanity (but not necessarily to the individual), better to use a property for productive industry than for private leisure. Since leftists are collectivist, they should therefore advocate the "best use" in terms of wealth creation, i.e. the free market.

The reason Mr. Marcks does not find it worth the cost to outbid Mr. Bucks' corporation in the story above is not necessarily that he has less money. The main reason is he and his fellows in the syndicate do not find it profitable to pay such an amount for the property — they cannot use it efficiently enough to cover that initial investment cost. Obviously Mr. Bucks can, and therefore he "wins" the bidding process.

This should not be interpreted as if the wealthiest always outbids the not so wealthy. That is a leftist illusion, which can only be proved if considering nothing but snapshots of society. If things are seen as part of a process, i.e. in a context, it should be clear that a free market "gives" a resource to the person(s) able to create the most value out of it. If someone can create more value than anyone using a certain resource, and is able to prove it, there is always enough capital available in a free market to outbid any competitor. (This does of course require some kind of ownership rights, since without such nobody would ever dare invest in any venture.)

A free market is therefore not mainly for the wealthy, but for the productive, and it always brings the most out of the limited resources nature gives us. Eventually, through trade, the values created are made available for the masses at minimum cost, i.e. to maximum net benefit. Any leftist should embrace such a "system" as an ideal. That is, if they cared about the level of prosperity in society at all, instead of snapshot equality.

Actually, Mr. Marcks should be happy he lost to Mr. Bucks's corporation. This only means the most is created from the resource, and that means Mr. Marcks does not have to bear the comparable loss of producing less efficiently. Also, he will personally (as will all of us) gain from the values created by the corporation when they are distributed on the market.

Perhaps Mr. Marcks should even thank Mr. Bucks for showing him there are more efficient ways of using the resource — and that Mr. Marcks's assets could be better used somewhere else.

April 14, 2006