The Limits of Free Markets, Both Economic and Intellectual

Today's blog originally appeared in Counterpunch on March 13, 2018.


Both in economics and speech, the market is a powerful metaphor.  Free economic markets are
efficient, and produce the greatest good for the greatest number of people by the fair interplay of sellers and buyers.  The marketplace of ideas is supposed to produce truth, and maximize free inquiry of ideas through the competition or rival ideas.  Both marketplaces are supposed to support contrasting forms of individual freedom.  Except the truth is that neither work in practice compared to theory, fixing their externalities and preventing one from corrupting the other  is challenge and task of contemporary western politics.

The market is a metaphor of modern western politics.  Belief in the efficiency of economic free markets dates at least to Adam Smith’s 1776 The Wealth of Nations.  For some economists, free markets maximize individual freedom producing both what is called Pareto efficiency (no one can be made better off without someone being made worse off) and Kaldor-Hicks efficiency (overall greatest net wealth for a society).  Government regulation interferes with economic markets, damaging both individual freedom and both forms of efficiency.  Market fundamentalism in the guise of contemporary Republican or neo-liberal politics, ascribes to this belief.

Yet there are limits to this economic market fundamentalism.  The same Adam Smith who wrote The Wealth of Nations also penned The Theory of Moral Sentiments and argued how economic markets are circumscribed by ethical values and virtues.  The Wealth of Nations in book five recognizes an important role for the government investing in infrastructure.  Later on, other economists have described unregulated markets as producing externalities such as pollution or monopolies.  Others see externalities to include the mal-distributions of wealth and income in the world or racial and gender discrimination.  Economic markets are also  plagued by problems such as free riders or collective goods.  These problems necessitate government action.  Even Milton Friedman recognized the need of the government to enforce the rules of the marketplace against force and fraud so that it would work properly.

The point is markets are not architectonic.  Markets are not inherently self-regulating or natural.  Karl Polany’s 1944 The Great Transformation made this point.  It took enormous state power to construct and maintain market capitalism. The logic of both capitalism and human nature is often against free markets, wanting to produce collusion, monopolies, or engage in rent-seeking behavior or political action to favor oneself.  Pure self-interest left on its own, as Nobel Prize economist Kenneth Arrow pointed out, cannot be aggregated to produce collective goods for a society.

The marketplace of ideas is also powerful.  John Milton writing in his 1644 Areopagitica argued against censorship and suppression of religious views in the belief that the competition among religious sects would reveal the truth.  John Stuart Mill’s 1859 On Liberty similarly believed that the free play of ideas would yield the truth if there was a “chance of fair play to all sides of the truth.”  And in American constitutional law, it was Supreme Court Justice Oliver Wendell Holmes, Jr. who in his 1919 Abrams v. United States dissent first introduced the market metaphor to the First Amendment when he contended that “the best test of truth is the power of thought to get itself accepted in the competition of the market.”  Since that decision, the hall mark of free speech jurisprudence is the belief that the marketplace of ideas will produce truth and inform the public.  Competition among rival ideas will filter truth from falsehood.

Yet if economic markets are flawed, so is the marketplace of ideas and they too may not be architectonic.  Beyond the fact that some are questioning whether truth even exists, what we learn from recent surveys is that faith in  free speech is waning.  Not a day does not go by that some group argues for restrictions on racist, sexist, or offensive speech or how the press should be regulated.  And a recent study by MIT professors points to something that many have suspected for some time–falsity or fake news  spreads more rapidly than truth on-line.  Because of the natural  tendency for people to be attracted to novelty, falsity is retweeted or posted more than truth.  The enduring power of myths such as vaccines cause autism is proof of this.  For a democracy to exist, its members must have the ability to express their views and search for truth.  Yet if the marketplace of ideas is not  working, democracy is in peril.

The problem then is that the marketplace of ideas too is producing externalities that must be addressed, but doing so without compromising the right and ability of individuals to think for themselves and access the information they need to do so.   How to regulate the marketplace of ideas to address externalities without censorship is a dilemma.   But this marketplace is also plagued or affected by the economic marketplace, allowing rich and powerful actors to use the resources they have acquired in there to adversely affect the marketplace of ideas.   The challenge is how both to preserve the marketplace of ideas from destroying itself while at the same time preventing the economic marketplace from destroying itself and corrupting the marketplace of ideas.

Are You a Crackpot? Take the Quiz!

U.S. President John Adams once declared: “Facts are stubborn things; and whatever may be our
wishes, our inclinations, or the dictates of our passions, they cannot alter the state of facts and evidence.”  Similarly Thomas Henry Huxley, biologist and defender of Charles Darwin, stated that: “The great tragedy of Science — the slaying of a beautiful hypothesis by an ugly fact.”
At one time we declared as crackpots people who denied facts and reality.  But if only Adams and Huxley lived now in a world of alternative facts and reality it might be they who are declared crackpots for believing in truth and facts.  Yet for those of us who still naively and perhaps foolishly believe that facts exist, science produces knowledge, and that there are ways to ascertain truth, contemporary politics is challenging.  While crackpot claims and conspiracy theories are as old as human nature, crackpots seem everywhere, lurking behind every posting on the social media, stories in the news, and even press statements from the White House. Crackpotism does not discriminate, it seems to know no political, racial, ethnic, religious, or other bounds.
All of us want to think we are in the right and that others are wrong, but is it possible that you too are a crackpot?  Ths crackpot quiz or index measures the degree to which you are a rigorous tough-minded truth seeker all the way up to being a certified five-star crackpot, ready to run for political office, host a social media site, or leader a group of similarly-minded folks.  The quiz includes classic as well a contemporary questions.
Good luck!

1. The Earth is flat.  True or false.

2. Fluoridation of water was and is bad for you.  True or false.

3. God created the Earth on Sunday, October 23, 4004 BC at 9 a.m. True or false.

4. Vaccinations have been proven to cause autism. True or false.

5. Humans did not evolve from another species because evolution as a theory is wrong.  True or false.

6. Global warming is a hoax cooked up by those who hate coal and the fossil-fuel industry.  True or false.

7. You stocked up your basement with food and provisions in anticipation of Y2K. True or false.

8. Lee Harvey Oswald acted alone in Dallas. True or false.

9. Elvis is alive. True or false.

10. You think that any politician or political party that you disagree with is the Anti-Christ.  True or false.

11. You believe in the Anti-Christ.  True or false.

12. You are the Anti-Christ.  True or false.

13. You believe everything as true what you or your friends read or post on the social media.  True or false.

14. You repost things on the social media before either verifying the source and accuracy of the story, or without reading it first.    True or false.

15. Former President Barack Obama is not a U.S. citizen and his Hawaiian birth certificate is fabricated.  True or false.

16. The U.S. government is concealing information about a UFO crash landing of aliens at Area 51 in New Mexico.  True or false.

17. Neil Armstrong walked on the Moon. True or false.

18. The Holocaust occurred.  True or false.

19. Crrypto-Zoology is a legitimate science. True or false.

20. All terrorists are Muslims. True or false.

21. All Muslims are terrorists.  True or false.

22. The only good immigrants are your ancestors.  True or false.

23. Donald Trump won the presidency with one of the largest Electoral College victories in US history.  True or false.

24. Al Gore invented the Internet.

25. Life begins at:
a) Conception
b) Birth
c) When you get your driver’s license.
d) None of the above
e) All of the above

Answers (If you believe in facts and truth, if not go on to the score section).
1 F. 2 F. 3 F.4 F. 5 F. 6 F. 7 F. 8. T.  9. F. 10.  F. 11. F.
12.  F.  13. F. 14. F.  15. F. 16. F. 17. T.  18 T. 19 F. 20 F. 21. F
22. F.  23. F. 24. F. 25. E.

Score:
If you even took the test raises questions about whether you have insecurities about being a crackpot, or conversely, you actually believe in truth and facts.  Nonetheless:

If you got 23-25 correct you are a tough-minded truth seeker, not fit for politics or working as a pundit in the national media.

If you got 20-22 correct you generally believe in facts and truth but you could be convinced to buy a deed to the Brooklyn Bridge.

If you got 17-19 correct truth and facts are challenges for you and you could either become a university professor espousing epistemological relativism or addicted to Sunday morning talk shows or tele-evangelicals.

If you got 14-16 correct truth and facts are matters of opinion and you believe that black helicopters are ready to land at any minute.

If you got 13 or less correct truth and facts are only what you believe and congratulations, you are  certified five-star crackpot.

Alternative Facts and Public Affairs

Note:  For nearly eight years I have served as the editor of the Journal of Public Affairs Education. 

For each issue, I write an introduction.  For the latest issue, I did an intro called “Alternative Facts and Public Affairs,” speaking to the latest battles in politics over science, truth, knowledge, and public policy.  Here is a portion of that intro.

What is a fact and how do we know when something is true? These are not just philosophical questions. In this era of intense partisan polarization, especially in the United States, the very notion that objective facts and truth exist is contested, and it seems acceptable for elected officials, policy makers, and the media to eschew real facts and opt instead for alternative facts. Contrary to the assertion of former US senator Daniel Patrick Moynihan, who once declared that everyone is entitled to his own opinion but not to his own facts, it now seems that everyone and each political party do have their own facts and truth. Why? Simply put, scientific facts and truth are not the same as political facts and truth; democracy and science are often in conflict, and the differing groups that support the Democratic and Republican Parties have vested interests in endorsing rival conceptions of truth. This is a dangerous proposition for governance and public affairs, where belief in knowledge, facts, and the pursuit of best practices premised on these is the mainstay of what we teach and encourage in our students as we prepare them for careers in public service.

For 30 years, I have taught American politics, law, and public policy. As someone with graduate degrees in astronomy, philosophy, law, and political science, my research and teaching centers on how policy making can be more evidence-based. In most aspects of our lives and in business, we are taught to draw on the best available evidence before making decisions. The same should be true for politicians and government. Decisions crafted out of political myths and faulty or no evidence yield bad public policy, wasting taxpayer dollars and leading to failed or ineffective programs. Yet too much policy is created without real evidence.

There are many reasons for this. One can clearly point to intense interest group politics and the corrosive impact of money on politics as possibilities. But there is also a profound difference in how scientists and politicians gather facts and think about the world.

Scientists (and most social scientists) subscribe to the scientific method. This is a rigorous approach, ideally using controlled experiments and the inductive process of gathering discrete data, which are then aggregated to test hypotheses. Scholars also often use statistical sampling to estimate how representative their samples are in terms of the phenomena being studied. One cannot examine every molecule in the universe, and good samples allow for generalizations. But there is always a slight probability of error.

For scientists, facts are rigorously tested but cannot be proved with 100% certainty. Science is about falsifying claims. Scientific knowledge is also incremental, built on what is previously known, as bricks laid one upon another to construct a wall. Scientists have built a wall of knowledge, facts, and truth. The laws of gravity, Einstein’s famous E = mc², and 1+1 = 2 are examples. Scientific facts and truth have made possible telephones, television, the Internet, and the cure for polio. If one denies scientific truth, one might as well deny civilization. While we may not have a social science or public affairs equivalent of E = mc², we do have an impressive trove of data and knowledge about the world of public policy and administration. We may not know truths that are etched in stone, but we do know what has failed and often what should not be done. In many cases, we have the lessons of history to guide us, or we simply do the best we can in a world of bounded rationality—we act based on the best knowledge we have and perhaps, in Charles Lindblom fashion, muddle though.

But (social) scientific knowledge is different from political knowledge. What is political truth, especially in a democracy? It is what 50% plus one of the population says: majority rule. For elected officials, what counts as facts and truth is what they learn from their constituents. A politician’s world is not one of controlled experiments, hypotheses, and statistically valid samples; what counts as valid evidence in making policies are the stories and interests of voters. This can be powerful evidence to someone who may need support in the next election. What is true in this sense has less to do with rigorous methods of investigation than with how well an assertion plays with the media or voters.

On occasion, scientific and political truth converge, resulting in good public policy. But historically they do not. The tension between scientific or expert knowledge culled from rigorous testing versus political knowledge based on majority rule is deep and has existed since Plato discussed it nearly 2,500 years ago. This is the technocracy/democracy gap. Some have more or specialized knowledge compared to others. Should the people defer to the experts or choose for themselves what they consider to be true? This is where political leadership comes in—to guide the public and make decisions based on the best knowledge at hand.

While science and democracy are in tension, how do we explain the partisan war on science between Democrats and Republicans in the United States? Battles over global warming and alternative facts are sourced in competing economic interests that support or sustain specific biases or factual worldviews. The two parties represent divergent interests that in turn have financial interests in rival conceptions of truth. Right now, Republicans are representing interests generally hostile to science, including energy companies that wish to deny climate change or workers who fear that automation will un-employ them. But this could change.

The gap between scientific and political knowledge might be bridged with more scientific education in schools. It might also be good if we elected more scientists to office. Together, this might create conditions that would make the political process more hospitable to science, yet there is no guarantee. Differing economic interests drive scientific skepticism, as do fear and prejudice, and something needs to be done to address both tendencies. The challenge for scientists and their allies is to convince the public and politicians that science is not a threat but rather enables and enriches our society.

As editor of JPAE and as a professor, I remain committed to the old-school idea that facts matter and truth exists and that both should guide the teaching and practice of public affairs. My goal has been to make sure that each issue of this journal contains articles that enhance our teaching and knowledge, helping us in the quest of producing the next generation of scholars and administrators who have the skills and knowledge to do their best to serve their constituents.