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{{DES | des = The distinction between markets and government is blurred because property and contract rights are not obvious, and whatever their definitions end up as, they make the market not "pure". | show=}}
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The government/market dichotomy is pervasive in contemporary political and economic debate. Many decry proposed ‘interventions’ into capitalism on the grounds that they are costly, politically motivated interferences that are vulnerable to capture by special interests. They assert that the ‘free market system’ should be allowed to operate free from outside interference: redistribution, regulation or public provision.

At the heart of this view lies some sort of neutral laissez-faire state, beyond which any ‘intervention’ is deemed unnatural. The ideal minarchist libertarian state would enforce property rights and contracts, and prevent force, fraud and theft. People could own what they acquired through ‘voluntary’ exchange; they would be free to do what they wanted with their property. I find libertarians rarely explore their preferred institutions much deeper than this, and build many of their arguments on the distinction between ‘markets’ and ‘government.’ However, on close inspection, the boundary between the two becomes blurred.

Complications with the Libertarian ideal #1

The nature of property rights is not at all obvious. Generally, a property right is thought to be a relation between a  person and an object, one that is respected by other persons in society. Owning something means that one is free to do what one wants with the thing: trade it, destroy it, display it, consume it or give it away. It also means that nobody else can do the same without your consent. But such a simple relation cannot be uniformly applied to everything that might be considered ‘property.’ The nature of the object or concept in question changes how the property right is defined.

Property cannot be autonomous, because doing ‘what you want’ with something that is autonomous is deemed abusive. Ownership of children or other people is therefore deemed problematic. Even in the cases where libertarians approve of ownership of, and trade in children or slaves (yes, they do), they would surely limit what could be done with, or to, said persons while they were owned. Similar boundaries concerning ownership can be observed with animals. Here the ownership is not problematic in and of itself, but it is still not the case that one can do whatever one wants with an animal, which could easily be abusive.

Another issue arises when the very nature of something is that it is person specific and so cannot be given away or traded. Court cases, votes, identities and credit histories are not appropriate candidates for trade, because that contradicts their definition. If court cases could be traded, this would quickly undermine the legal system. A less extreme case is when something, though tradable and ownable, is deemed too important to be at the whims of the owner. Even those who approve of a market in organs would surely not approve of a rich man buying them all and putting them into a blast furnace.

Property is a human construct, and the fact is that many aspects of nature do not respect clearly defined property boundaries: seeds, air and water all flow freely across them. Hence, problems can arise from dumping waste into a river or emitting it into the air; or from seeds from certain plants being transferred across land boundaries; or from sound and light pollution. The ‘invasion’ of property with more clearly defined boundaries by things that do not respect them will inevitably result in legal conflicts. How these cases are resolved will help shape subsequent laws that develop.

Property is also subject to changes as technology and politics evolve. A relatively recent development is environmentally motivated property rights, used in an attempt to prevent pollution. Relevant decisions such as how many carbon/fishing permits are handed out, and how much they are sold for, impact the workings of the economy. Newer still is intellectual property. Consider the case of digital photographs – if one uploads a photo to the internet, has one released it for any use whatsoever? Do the limits depend more on the nature of the photo itself than whether one has supposedly ‘voluntarily’ released it? Or what if someone else took the photo? There is no easy answer to such questions.

Complications with the Libertarian ideal #2

The other side to the libertarian ideal is the liberty of contract. Contracts are mutually agreed on actions or exchanges subject to certain conditions, or payments, from each side. Surely, libertarians ask, everyone should be free to negotiate the terms of their own contracts, and the state should only enforce such ‘voluntary’ decisions?

Such a presumption obviously precludes the mentally ill, or children (who are also precluded from purchasing certain items). Where the boundary for these is defined is an open question, in a constant state of flux as new mental illnesses are discovered, or as children become more educated, or as populations age and older people must be included in such considerations.

However, even for mentally competent people, the fact is that discussing a contract for every good or service one receives would be highly costly and quite possibly computationally impossible (i.e. it would take more time than there is). So norms develop. You don’t sign a contract every time you go into a restaurant: you know the deal, and so do the workers and owners. Shops are expected to provide receipts so that people can keep track of their transactions. Many jobs – particularly low paid and or short term ones – do not involve contracts at all. These are implied contracts, and figuring out what exactly has been consented to – what it is reasonable to infer from observed behaviour – is incredibly tricky.

Even when one does sign a contract, it is impossible to foresee every eventuality that might occur, particularly with long term contracts. So contracts are almost always, necessarily, incomplete. Employment is the best example of this. If your boss asks you to get them a pen, do you retort ‘that wasn’t in the contract?’ Of course not: it’s simply a reasonable request given social norms, the nature of the job and so forth. On the contrary, if your boss asked you to strip, that would not be deemed reasonable in a court of law, despite it not necessarily being in the contract that such behaviour was not permitted (or even, perhaps, if it was in the contract but was not clearly stated or expected given the nature of the job).

Even beyond the nuances of property and contract law, there are additional laws such as immigration restrictions, limited liability, laws that define companies and protect shareholder’s interests, all of which many consider a fundamental part of capitalism. Furthermore, accepting the logic behind, say, limited liability, forces one to conclude that protecting people from their risks can be good for an economy, and similar arguments can be extended to consumer protection, get out clauses in contracts, and even safety nets. Decrying all such interventions is a pretty hard position to defend.

I could give endless examples. The fact is that defining property, contracts and the supposed ‘core’ of capitalism is neither straightforward nor simple, and inevitably involves value judgments and arbitrary decisions with winners and losers. The nature of capitalist – or any system’s – institutions depend on culture, demographics, income distribution (who can afford the best lawyers), the historical context upon which past laws were formed, and much more. And such decisions will inevitably have winners and losers and therefore will affect present and future patterns of production, distribution and exchange.

Whither Free Markets?

These complications put the idea that there is such a thing as a ‘free market’ in its place (there isn’t). However, there is a partial response I have seen: how ‘free’ a market is can be judged in a relative sense. A market that is more or less regulated can be judged as further from or closer to the idea, even if said ideal is unattainable or impractical. But whether or not something is within the minarchist ideal of property & contract law does not tell us how big an impact it has on an economy. For example, something as widespread as ownership of land, or decisions regarding employment contracts, would have enormous impacts on the economy. Decisions surrounding property and contract law are as significant as any other, perhaps more so. The relative ‘freedom’ of a market cannot be judged in such simplistic terms.

There is also the question of whether market freedom is defined by the amount of rules that are in place. Sports generally have rules, many sensible, some arbitrary, some confusing to many. But does it automatically follow that sports players are not as ‘free’ to play the game as they would be in absence of the laws? Laws such as limited liability mean an entrepreneur is more ‘free’ to start a business. The 1980s changes in anti-trust law made it less about sustaining competition and more about ‘consumer welfare,’ which gave rise to greater concentrations of market power and control over key variables such as price by corporations (prices are, in fact, not magic but often set by administrators). Are these markets more ‘free’ than ones characterised by a greater degree of choice and competition?

As a side note, I am aware of the existence of anarcho-capitalists, who advocate no laws whatsoever. In this case I’m not really sure what they’d classify somebody who owned land, and had absolute rights over that land, other than some form of government. The only response I’ve seen to this is the ridiculously naive argument that people/corporations would only use ‘reasonable’ measures to remove people from their property. In other words: everybody would obey some sort of libertarian ideal, despite it not being enforced.

I won’t draw any normative prescriptions from this framework here, but suffice to say I feel it takes the rug out from underneath a lot of libertarian arguments against ‘intervention.’  There is no neutral baseline against which we can judge said ‘interventions,’ and none are immune from value judgments, arbitrary decisions and difficult questions in a legal system with limited resources. None of this is to say that the specific cases I’ve identified aren’t up for debate, but that’s the point: libertarianism is in many ways an attempt to escape political questions and leave everything up to the market. But as I have shown, every law or social institution raises difficult questions that can only be resolved through political debate, through court cases and are dependent on various conditions that vary across time and space. The question becomes less about whether ‘market outcomes’ are inherently just, and more about debating just outcomes without being plagued by the arbitrary concept of ‘the market.’
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