After a grindingly long hiatus from the blog, I have returned with a vengeance! And, as the first of many scorching topics, I would like to address my own personal revelation regarding the free market.
The free market is the ultimate test of that old philosophical chestnut “Does money buy happiness?” and its fate rests on the answer to that age-old query. I will elaborate later, but for now I will say that the short answer to that question is no. But the long answer is a resounding and decisive yes. Before I explain, I need to get a few points out of the way. The question is filled with many tricks just under the surface like crocodiles in a river. For example, many ridiculously rich people are unhappy, yet many dirt-poor families are quite content. This seems like an obvious counterexample to the statement that “money equals happiness.” And the truth is that is absolutely correct. Money certainly does not equate to happiness. It can, however, buy it. Think of it like the shifting price of the ultimate commodity of happiness. To take a more practical example, money does not equal gold, but money can be used to purchase gold (with a gold standard, however, money does in fact equal gold). Money does not equal pastries, but it can be used to buy them. In short, the value of the money and the value of the pastries are completely irrelevant. Also, there is the difficulty that different things make different people happy. One person might enjoy reading books, while another might enjoy being a wandering beggar monk. There is an easy and a hard way to phrase this difficulty. The easy way is that one person might enjoy buying boats, and another person might prefer cars. The hard way to put it is that one person might derive more happiness value from money than someone else. Like trailer-park-Tammy compared to Mahatma the vow-of-poverty monk. Both cases are quite simply irrelevant. The reason will become abundantly clear later.
The last major issue I would like to preemptively handle is that the free market does not in any way maximize economic efficiency. In fact, the entire point of the free market is that it is economically inefficient. I take this point almost directly from Stefan Molyneux, since it needs reiteration again and again until someone understands. If the end goal of life was to accrue as much cash as possible, then good food would be insanity. People would live on carb solution and vitamin pills. Everyone would live in a house the size of a rabbit hutch with ten other people to save on housing costs. Recreation would be lunacy- why waste time that you could spend working and therefore earning money? Nobody would have children because of the extravagant cost involved and the minute financial benefit that you might receive in your old age. We of course know that financial benefit is far from the point when children are concerned, but according to the stereotype of the purest free market, that sort of behavior would become commonplace. That is ridiculous.
Now, onto the main question at hand. Does money buy happiness? I wake up some morning, think to myself “I want a pastry.” I walk a few blocks, I buy myself a pastry, and I enjoy it. I have just proved my theory in the most direct and unequivocal terms possible. The free market is the maximally efficient matching of desire with fulfillment. Nothing more and nothing less. Allow me to build to the free market from the ground up. Beginning from a marketless environment, a barter system will almost certainly appear. Barter works because different people can get more utility out of different items or commodities. Nobody would trade a pound of gold for a pound of gold because it is no more useful to you than what you have. However, you might trade a chicken for a basket of fruit. The person you are trading with values the chicken more than the fruit, and you value the fruit more than the chicken. Both of you are left with more value than you started with in subjective terms. Maybe this is because you enjoy eating fruit more than chicken, or maybe for some other reason like your brother is dying and desperately needs strawberries to survive. Perhaps the person you traded with is a master chicken chef who can cook chicken into a dish that he can sell for many times the value of the basket of fruit. Whatever your reasons, both parties are better off than they were before. Perform this type of exchange billions of times for billions of people with every imaginable commodity and service, and everyone ends up with that which they derive the most value from relative to everyone else. If I like to eat fruit far more than anyone else does, then I have no problem paying the same price that everyone else does.
However, there is a problem with the barter system. What if I want something that the person I am trading with does not have? If you’re in a bartering environment, you have a mighty task in front of you. You would have to trade for something that someone else will find valuable, and then keep doing this until you find a person with the item you want, and have an item valuable enough to them in order to trade for it. Trader A (you), wants Trader C’s item, but C wants Trader B’s item. So A must trade for B’s item, and then trade for C’s item. Though that doesn’t seem so bad, imagine the same situation with a thousand trades necessary. Impossible. Enter the almighty dollar. Where there exists a universal denomination of value, all you have to do is trade until you have acquired enough money. This involves, at most, two exchanges for items with equivalent monetary value. You sell the item you have (i.e. trade it for money) and then buy the item you want. Money serves a similar function regarding items of dramatically different value, and also for scaling trade in quantity and maintaining equivalence. For example, an apple may be roughly equivalent in value to an egg, but one of the parties may be reluctant to trade a thousand apples for a thousand eggs. However, if an apple costs 50 cents, then you know the exact value of any given quantity of apples. If an egg costs 52 cents, then you can work out an exact trade.
The addition of money results in one layer of abstraction on top of the simplest possible free market, which greases the wheels enormously. Unfortunately, many people get quite snarled up in the abstraction and then they can have their money stolen from them by those knowledgeable enough to do it. The first abstraction isn’t the real problem, since it seems to follow readily from bartering. The layer on top of money itself appears almost immediately when money does, and that’s where sheep get robbed. Once there is a universal commodity which can be traded for any specific item, there arrives the concept of “imaginary money.” Namely, credit and debt. Money makes possible the shift from “you owe me two chickens and a hammer!” to a precise assessment of the actual debt incurred. More importantly, money can be precisely manipulated as necessary. Interest rates are simply impossible with the two-chickens-and-a-hammer system. At what point does that become a third chicken? As a result, loans are always advantageous to the debtor, and nobody offers them. But once it becomes possible to make a percentile profit based on the length of the loan, capital investment becomes a real option. Those clever enough to build themselves a business using the system make a large amount of money, and those foolish enough to drive themselves into backbreaking debt are crushed. Much to the chagrin of the bank, I’m sure. Then, more abstractions on top of that, you get currency markets, stock markets, and who knows what other kinds of purely academic constructs of imaginary funds dancing around all over the place on stilted strings of whim and fancy. In any case, the sheep get robbed and the wolves get rich when the system is complex enough for there to be specialists in its manipulation and everyone else is clueless. But that’s a one-way transition of wealth from the poor to the wealthy, and not a factor of the truly pure free market except insofar as it can be ascribed to “stupidity.”
In the true free market no agent has the power to act unilaterally. I have a great deal to say about unilateral power, but that’s an in-depth philosophical issue for another time. In essence, nobody can just do whatever they want and screw the consequences. This means that those who steal from their consumer base or their investors will pay for it because those consumers or those investors will realize they don’t want to do business with or invest in that company.
The end point, the argument I am trying to build here, is that money is a universal commodity which enables you to buy anything you choose. It follows that you will choose whatever gives you the most subjective value. If you want a pastry more than an apple, then that is what you will choose (taking into account that you will desire the pastry less for unhealthy effects, etc.). If having children makes you happy, more so than the monetary cost they entail (I think most people would agree), then you will have children. Just to test this assertion, would you have a child if it cost you ten dollars, assuming you have ten dollars to lose? A thousand dollars? A hundred thousand? A million? Ten million? How about a billion dollars? I think there are very few billionaires who would be prepared to forsake their entire fortune, to go utterly broke, to have a child. Though they might be more prepared than the millionaires, who knows?
The most basic tenet of the free market is the maximization of fulfillment. People who have desires will want them to be satisfied, and those interested in fulfilling their own will attempt to fulfill the desires of others. All parties will be engaged in mutually beneficial trade, with the occasional single-sided trade because one of the parties makes a mistake. The free market is a million vendors all competing to fulfill your desires most effectively, and with the least cost on your part. The free market is, at the same time, being one of those vendors, doing your damnedest to do better than your competition in every conceivable way, for less cost. The most efficient possible matching of desire to fulfillment should be the goal of society. And the best possible method is staring us in the face.