Quit Using These Bad Arguments

Your instincts are wrong.

Partial list of poor arguments trotted out way too often against free market policies.

• People don’t know enough to make those decisions, people are too stupid to be able to do that for themselves, or that would mean everyone would have to be an expert in that specific area.

  • There is a lot of arrogance embedded in this bad argument. Just how much do YOU honestly know about all the things you think you know? Do you own a car or have a driver’s license? Do you know how a car works much less how to make one? Even if you are a PhD-level engineer, I challenge that you do not. It has been shown how tough it is to make a toaster or a sandwich. Famously, it is the case that NO ONE knows how to make a pencil. The beauty of a capitalist free market is that not only can we leverage the skills and knowledge of others to bring us goods and services that were unimaginable in the past. It even helps us make good decisions. The free market employs the magic of competition to continually work to help everyone find better and better options. Through the promise of profit and the risk of failure, the free market jointly provides opportunity and discipline to suppliers allowing buyers to navigate to solutions they could not imagine on their own. When buying a car in a well-functioning free market, for example, the naive buyer faces risks like paying a little bit more than they had to or getting a little less of a given feature like gas mileage. These mistakes amount to mere rounding errors in the scheme of things. They are slightly suboptimal, but hardly noteworthy. Overwhelmingly, the free market substitutes the need for expertise. It does the heavy lifting so we don’t have to.

• People can’t be trusted to spend that money wisely or people won’t make good decisions when it comes to that (medical spending, school for their kids, etc.).

  • Related to the previous bad argument, note how this reasoning is often used in those areas where we most suppress the free market. Notice also that it isn’t as much applied to areas as important or more important than medicine or schooling such as food and housing. Sure we have government certification and permitting (strong arguments against the need for only government to play that role saved for another day). Still, we buy our groceries to cook for ourselves and families with little oversight. We go to new restaurants based on word of mouth rather than proven results. We buy and renovate our houses with our own desires in mind rather than from a book of approved choices.¹ We need not be CIA-trained chefs or the next Frank Lloyd Wright to feed and shelter ourselves and loved ones. When proponents of government-provided/financed medical care or public (government) schooling recognize failures within these systems, they never admit to their own failures. They rationalize how they need more resources and more authority and decry the alternatives as robbing from them and preventing their success. So the failure is not from lack of customers but too many given the supposedly limited funding. When they do cite low demand, they complain how when given choices people exit them for better alternatives (better medicine or children’s education). So people are making good choices rather than bad ones? There is always a hint in this bad argument that the “other people” would be making bad choices. Yet what is the evidence that these “other people” are failing elsewhere? To take seriously this argument, I would expect to see mass chaos in all other facets of live. For some reason people make good choices for themselves and their children in all areas except those where government has been entrusted to provide.

• If you allow a free market, only the rich and powerful will benefit or the rich and powerful will exploit the poor and vulnerable.

  • The rich and powerful exploit their position in all systems. It is only in a free market that their behavior is best kept in check. History and current examples conclusively prove this. There has never been a utopia (socialist or otherwise) that defied these natural conditions of man. It is unfortunate that we are not governed by angels nor living among them. In free market capitalism not only do we all have the opportunity to advance, but we turn the natural propensity of self interest into a virtue. As Adam Smith wrote, “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.” It is true and quite obvious that a free market system creates opportunities for wealth of the wealthy and poor alike far greater than any other system. This is because beyond the raw gains the added virtue of a free market is that it transforms the zero-sum state of nature into a positive-sum game whereby each person’s advancement generally comes not at the expense of others but through their mutual gain. Failures, and there are many, in a free market tend to be the exception and due to political failure rather than free market failure. As Milton Friedman noted, “We will not solve our problem by electing the right people. We will only solve our problem by making it politically profitable for the wrong people to do the right thing.” The goal is to bring the right incentive structure to our political governance rather than attempt to bring our ideal outcome to the interactions among free people.

• Renters are bad for suburban single-family home neighborhoods. Therefore, we should work hard to prevent rentals.

  • This one is tricky because like almost all bad arguments it contains kernels of truth that lead one with bad reasoning to bad conclusions. Let’s set aside the inherent prejudice that underlines that sentiment as well as the problematic point of view that someone outside of a market exchange should be able to forcibly alter the exchange. In other words, I will ignore the violation of property rights going on—not letting the owner do what he wishes with his property. It likely is true that on the margin renters do not care for their properties to the same degree that property owners do. That is a great example of the well-known principal-agent problem. But it assumes too much. The bad argument ignores a key question: Why is there a market for renting single-family suburban homes? Because of the mortgage cracked down following the 2008 self-imposed housing debacle, families that would otherwise seek ownership have been locked out of the housing market as owners. They’re only ability to get into a single-family suburban home is as a renter. Indeed, they probably do not take care of the property as they would if they were the owner. But the bad argument assumes they should just be owners, which is not an option available to them. Shutting down the ability for existing owners or subsequent investor owners to then rent to them will only diminish the value of the single family suburban neighborhood that seeks these protections. It is a self imposed reduction in demand. This supposedly desired solution, prohibiting renters, does not help the neighborhood. It hurts it.

• We are a nation of laws. Therefore, illegal immigrants do not have a right to be here.²

  • This begs the question in the true, correct use of the term—it is circular reasoning. Opponents of illegal immigration need to make the case that those laws are ethically justified. That case can be made (I think it is a stretch, yet I will restrain the scope of this as with so many of these), but this argument doesn’t make it. Instituting laws does not make those legislated laws just. Their justification relies on their own ethical foundation. The way in which this argument is a bad argument against the free market is that a free market extends beyond arbitrary borders. A similar bad argument is made replacing “illegal immigrants” with “unauthorized foreign goods and services” as well as “illicit drugs”. The “free” part of free markets is freedom. This is the right to exchange with others. In other words it is a negative right—the right to not be intruded upon. To argue that one does not have that right in these circumstances requires one to make a rights-based argument. The circular reasoning of appeals to authority here is a foundation made of sand.

• Allowing (sport, concert, etc.) event ticket resellers (market makers derogatorily referred to as scalpers or touts) to markup tickets in secondary markets (be it on the street or online) is wrong.

  • This one is inherently difficult because the word “wrong” is such a loaded term. Generally, those perpetrating this bad argument are invoking some sense of cosmic justice. They are implying that it is unfair presumably to those who could’ve paid less. The problem with this argument begins with it being a complete misunderstanding or total ignorance of the concept of scarcity and the need for something to determine allocation. Prices through the market system are undeniably the most efficient means of allocating scarce resources. They are the best form of rationing. All other alternatives favor one group or another. It is alleged that market prices favor for the rich over the poor, but this is nonsensical. The rich are subject to the same primary constraint everyone else is: namely, time. In fact, the rich face a greater constraint than do those of lesser means because their time is more valuable. How do I make such a provocative claim? Easily and it can be easily seen with just a little bit of logic. The rich have definitionally greater opportunity costs. Because they are rich, there are more things they can do with their time. They have more alternatives. High prices in the secondary market as compared to the initial offering, including for sure fantastically higher prices, are simply the demonstration of how much scarcity there is for the good in question (tickets in this case). It is not some mythical and maniacal “rich” who were bidding up the prices. It is simply those who value it most—sometimes the rich, oftentimes not. Obviously, there can be some who would very much enjoy the ticket but who find the ticket’s market price beyond their means. This, again, is just a problem of scarcity, and if you want to charitably give them the opportunity to enjoy it, you can do so. Just as you could give a 16 year old earning only the minimum wage a Ferrari. The car is well beyond the child’s means. The fact that he would really, really, really enjoy it does not mean we have a fairness problem given the fact that the cost of a Ferrari is beyond his capabilities. The solution to this problem of scarcity, as in all problems of scarcity, is greater supply, and, if you wish, charity to help subsidize the cost for someone who wishes to have the thing they cannot afford. The solution is certainly not to distort the natural market outcome through price controls.

One theme running throughout all of these is to trust people to make good choices (allow freedom) and trust the market to help them do so (allow markets). Your instinct should be TALA—Treat Adults Like Adults—as well as before all else fails use markets.

P.S. I’ve heard these too many times for this to be a strawman post.

1. Historic district regulations notwithstanding.

2. I admit I shoehorned this one in a bit. But only a bit. Most of these are pragmatic arguments—what works best. This one suggests principle based—what is most just.