In the article, “The Myth that Laissez Faire is Responsible for our Current Economic Crisis” Dr. George Reisman details a few ways in which the country currently strays from laissez faire capitalism. He provides the following description of what he views as this ideal economic system:
” … a politico-economic system based on private ownership of the means of production and in which the powers of the state are limited to the protection of the individual’s rights against the initiation of physical force.”
What Dr. Reisman means by “individual” determines whether he describes a potential goal, a noble ideal or pure fantasy. In a much larger body of work Dr. Reisman defines freedom as “the absence of the initiation of physical force.” These two works together reveal that the only function of government in laissez faire capitalism is to preserve individual economic freedom.
Economic freedom suggests free market activity. The one requirement for a free market that everyone acknowledges is voluntary exchange, but there are two other important requirements as well. The goods and/or services need to be produced without exploitation. Thus a plantation owner voluntarily trading cotton picked by a slave is not engaging in an overall system of free market exchange. The other requirement is that pertinent knowledge about either the product or the producer cannot be hidden or distorted for the advantage of “forcing” the exchange. Corporations fail to meet this requirement in a variety of ways.
The most basic free market system is the bartering of goods and services. This was a common form of exchange in agrarian culture, including ours two hundred years ago. In fact, such free market bartering still occurs through “under the table work” or simply when neighbors exchange useful services to each other. The irony of these free market activities, a rarity in the age of corporations, is they occur independently of government protections.
One allegedly important laissez faire protection provided by government, the law enforcement of contracts, would be a significant government hindrance to individual free market activity. In fact, the greater the need for Big Brother to enforce contracts the greater the assault on individual free market activity those contracts are likely causing. But this assumes that an individual is a person, which is likely not what Dr. Reisman has in mind.
In his larger body of work Dr. Reisman refers to economics as a science. He also asserts that economic knowledge is a process of deduction, which is news to real scientists. Scientific knowledge is gained through a process of empirical induction, sort of a grassroots effort to build knowledge up from large amounts of observable experiences.
Such a process of actually building up knowledge from reality would minimize the top down role of economic scholars such as Dr. Reisman and the “knowledge” produced by think tanks and schools of thought. In his larger work Dr. Reisman deduces that contracts represent an essential right for the cause of economic freedom despite the overwhelming empirical evidence throughout history of free markets occurring without contracts. Such an empirically challenged deduction can only be made from a “scholarly” premise that corporations are individuals, and implying that the quaint notion of individuals are people is ignorant (Dr. Reisman indeed charges people who focus on empirical results as ignorant). The resulting “knowledge” this deductive process gives us is either pure fantasy or devious hypocrisy, as will be explored further next time.