Often in the economics classes I teach, as well as in the other discussions I have on economics and government, I face an array of misunderstandings of what free markets mean. Let’s look quickly at two:

First, there is the idea that “economic power” is in the same category as “government power.” Equating the two is an effort to turn around a common complaint of market advocates and use it to support the the expansion of government. Jim Wallis, CEO of the left-wing Christian “Sojourners” ministry, writes:

The radically anti-government ideology of the current right wing Tea Party ideology is simply contrary to a more biblical view of government, the need for checks and balances, the sinfulness of too much concentrated power in either the government or the market, the responsibilities we have for our neighbor and the God-ordained purposes of government — in addition to the churches — in serving the common good and, in particular, to protect the poor.

Although the initial language about a biblical view of government sounds convincing, it is fraught with misunderstanding. One mistake is this: “serving the common good” and “protecting the poor” in the sense of invasive government regulation and redistribution of wealth [something Wallis and others are quick to advocate] are not “the God-ordained purposes of government.” They are the province of churches, organizations, and individuals. Such government expansion just concentrates more power in government hands.

And we all know what “concentrated power” looks like in the hands of government. There is a long history of dictatorships, autocracies, oligarchies, and expansive, smothering socialist bureaucracies in this world. Ultimately, that power is a power of the sword: threatening, coercive, and violent.

But what is “concentrated power” in the market? Is it amassed wealth? [Read more...]