04/24/2008

Give Economics A Chance

New York Times columnist-turned environmentalist and sometime economist Thomas Friedman came to Brown Tuesday. Someone threw a pie at him. Among the reasons she cited is "his sickeningly cheery applaud for free market capitalism's conquest of the planet." Whether you think free market capitalism is the path to prosperity or the road to ruin, characterizing it as a force capable of conquest demonstrates a fundamental misunderstanding of capitalism itself.

Here's the thing about capitalism: it only works when people agree to participate, and they do that because it's the most attractive offering at the economic system buffet. It's like democracy in that way. Capitalism can no more conquer the world without the world's consent than democracy can. (As opposed to authoritarianism and totalitarianism, which can – and do.) If people don't participate in government, democracy can't spread. If people don't willingly enter into economic exchanges, capitalism gets nowhere.

That doesn’t mean either always does great things. People voted in Iraq, and it's not exactly Shangri-La over there. The Chinese have embraced capitalism more fiercely than anyone could have expected, and they've got pollution, disease and collapsing coal mines as a result. But they keep making deals, opening businesses, earning money and buying and selling. Any 5-minute walk in Beijing presents at least half a dozen opportunities to buy something – whether it's dumplings from the dumpling restaurant or a DVD from the guy on the corner. He's the one helping free market capitalism conquer the planet.

There's a reason capitalism is "conquering" the planet – left to their own devices, it's the "system" individuals choose to participate in. It may not be perfect, but unlike other systems (like communism) it's organic. It doesn't have to be forced upon an unwilling populace by a powerful authority. People choose to create it.

Whether you want to look at it as utility maximization or as "the pursuit of happiness," you can't argue with what we do. And we're going to do it whether we have a free market or not. We may not like the laws of economics, but, like winter, death and gravity, it's not for us to decide whether they exist. Economics is based on laws of nature – human nature. Throwing baked goods at famous economists isn't going to change that.

So say what you will about globalization. Say what you will about fake plastic consumerist environmentalism. But rejecting the facts of economics is like denying evolution.

If you want to take issue with free markets, I suppose you can. But time and time again, over thousands of years, they've proven to be the most efficient, most equitable way for everyone to get what they want. They're not perfect, but they're the best system we've got.

I know what you’re thinking: free markets aren't equitable! (This is Brown, after all.) They're not fair, I'll give you that. But that doesn't change the fact that everyone involved has the same amount of free will. (Obviously, when coercion is involved this ceases to be true, but that’s not capitalism. I’m not defending these examples. That's like using the Soviet Union to defend communism.) When everyone gets to make their own choices, no one is above anyone else. It's even better than representative democracy, where we choose people to make our choices for us. In a true free market, the individual reigns supreme. It's not good for everyone, all the time, but it's based on everyone deciding, going after, and hopefully getting what they want.

The "homo economicus" model has its flaws, yes, and is overly simplistic, yes. No one is ever "perfectly informed" as the economists would have them be. We do have ethics and morals and societies and non-material desires. But that doesn't mean there’s anything fundamentally wrong with economics. It just means it doesn't explain everything. What can?

Yet the majority of the world doesn't seem to understand economics. And not just the man on the street; among the ranks of non-economists are candidates who promise to return automobile manufacturing jobs to Michigan, politicians who consistently subsidize corn farmers and liberals who don't think increasing the minimum wage will lead to increased unemployment. And, apparently, some Brown students.

I know we hate requirements here, so I shouldn't even suggest it. But I think we should require economics in high schools. Understanding how – and why – markets work is at least as important as understanding U.S. history. Because believe it or not, the textbook that begins, "Assume an economy only has two goods: apples and oranges" explains a lot about the way the world works. Maybe then we could focus our energies on things we can change: Farm bills. Public schools. Scientific research. Immigration laws. That's where we can make a difference.

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