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Saturday, March 31, 2007

law of the marketplace?

Earlier this week, a person named Anonymous found my post from last month on the minimum wage. Anon raises a few good points, but also includes this breathtakingly inane argument about economics:

To raise the minimum wage is a true "crime against humanity!" It is a lie hatched in that same hell that tries to persuade us that somehow or other, we can ignore the law of the marketplace. As with the law of gravity, we certainly can ignore it. But we can not avoid the consequences of ignoring it.

Anon is simply wrong. Economics is not a science in the sense that physics is. Gravity has existed since virtually the beginning of the universe. When Isaac Newton formulated his law of gravitation, he was describing something that was already there, something that is (quite literally) universal. We cannot escape the effects of gravity, even if we could travel to other planets or other galaxies. By contrast, economic systems are merely human creations. The "law" of supply and demand may be a useful tool to aid producers in pricing their goods and services in a market economy, but it is not truly a law in any sense of the word. Nobody is required to set prices for maximum profit. And outside a market economy, supply and demand may not be relevant.

In a gift economy, for example, generosity is more highly valued than profit margins. Success is defined by what one gives away. The potlatch custom of Pacific Northwest tribes is perhaps the best known historical example, but gift economies still thrive today in many forms.

Computer programmer Richard Stallman argues for a software gift economy:

When your friend says "that's a nice program, could I have a copy?" At that moment, you will have to choose between two evils. One evil is: give your friend a copy and violate the licence of the program. The other evil is: deny your friend a copy and comply with the licence of the program.

Once you are in that situation, you should choose the lesser evil. The lesser evil is to give your friend a copy and violate the licence of the program.

Now, why is that the lesser evil? The reason is that we can assume that your friend has treated you well and has been a good person and deserves your cooperation...

However, to be the lesser evil does not mean it is good. It's never good - not entirely - to make some kind of agreement and then break it. It may be the right thing to do, but it's not entirely good.

Stallman has devoted much of his life to saving computer users from this dilemma. Since 1983 he has created software under a special license that gives users what he calls that four essential freedoms:

  • Freedom to use the program for any purpose
  • Freedom to study the source code for the program
  • Freedom to help their friends and neighbors by sharing copies
  • Freedom to give back to the community by submitting modifications and improvements

Through the GNU project and the Free Software Foundation, Stallman has significantly influenced the development of the software industry. Most of the software that makes the Internet work is available under Stallman's GNU license. It is not too much of a stretch to say that the Internet is the product of a gift economy.

Another gift economy, one that has survived from ancient times and still thrives today, is the church. Members do not go to church to purchase goods and services. Churches rely primarily on voluntary giving to meet their budget requirements. And even though many churches struggle to make ends meet, the success of this organization for 2000 years is a testimony to the fact that market economics does not control our fate.

Which brings me back to anon's comment. Contrary to what anon declares, as a matter of fact we can ignore the "law of the marketplace." A market-based economy is just one of many possible economic systems. If our goal is to eventually funnel all our money into the hands of those who are most eager to obtain it, then a pure market economy is the way to go. If, on the other hand, we value human dignity more than profit margins, we need to look for ways to temper the market's more ruthless effects.

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At 3/31/2007 6:13 AM, Blogger truevyne said...

I don't get economics, so I'm not speaking from a wealth of knowledge. I don't know what increasing the minimum wage does except force employers to pay the lowest workers better. I can see both sides of that coin- "Employers forced" and "better pay for lowest workers" seems like an ethical draw to me. When it comes to a draw, I personally fall on the side of the underdog, but that's not U.S. marketplace law.
About computer software. I won't pirate software, and I am ever so grateful to the developers like the one you mentioned who works against corporations to create shareware. In much of my work lately I must use Open Office (free shareware) to view online documents from others. I'm irked everytime my computer automatically tells me I have to spend $100 to buy Microsoft Works to open a doc. It came installed on my hard drive and I can't figure out how to get it off! I'm not looking forward to what I'll have to do when Vista come in the mail for my laptop and the word processing program clash involved with that.

At 4/01/2007 8:42 AM, Blogger Steve Hayes said...

Marxists and free enterprisers turn economics into a religion -- they worship the "principalities and powers". Though there are denominational difference between them, they are basically the smae ewkligion -- man must be subjecxt to economic powers.

At 4/02/2007 8:54 AM, Anonymous Anonymous said...

Economics not a science? Come on! You might as well say the earth does not rotate on its axis orbiting around the Sun! Defiance of reality will not change reality. Economic systems are not merely developments any more than physics is a series of developmental studies examining the nature of life. Economics simply recognizes the realities of life as it examines and seeks to understand the various systems by which societies engage in economic activity. Barter, cash, etc., it really does not matter. From the very earliest of eras, regardless of the level of social development, men and women have engaged in economic activity.
The one unfailing law of economic activity is profit. As motive and reward, applied either to the individual or individuals within a larger organizational construct such as a hunter-gather, agrian, city-state or nation state or lately the joint stock corporation, profit is the fundamental and unchanging constant. Those societies which have either ignored or despised that constant have not been successful.
A market based economy is in every way superior to any other organizational principle. It alone respects fundamentally those most precious principles of individualism and self-determination that are so deeply rooted in the Western world view. Structures such as ancient tribal hunter-gatherer groupings, the feudal manor-field structure, as well as structures based on a titled monarchy and the pure communist or socialist structures have failed miserably or are in the process of failing for no other reason than that these structures are less than ideal in meeting the needs of people.
Its superiority is demonstrated by in it successful practice in both primitive and advanced societies. For one need not hold a doctoral level degree in economic studies to be a highly successful entrepreneur. Whether on the micro level of men and women in a third world nation buying and selling in the local market or groups of men and women cooperating to buy and sell in numerous marketplaces throughout the world, this one method of economic organization is superior. Its structure dominates the modern world.
Within a market economy pricing is simply assigning value to goods and services. Errors can be made. Good examples are the Tulip Crash that so affected the Dutch of a bygone era and the DotCom Crash of recent memory. Left to itself, the market will set prices for goods and services that are equitable. A example of this was the demands for “Beenie Babies,” which once sold for $5-7 but now rarely bring more than .50 at a yard sale. In each of these cases, prices not based in real value were not sustained.
No one is required to set prices at market maximum. Within any market there will be a range of prices offered by buyers and sellers. There is not one buyer and one seller. There are many buyers and many sellers. Some will be willing to sell at a lesser price, others will hold out and insist on a greater price. The same will hold with buyers. Each will act based on their view of value. Regardless of where one lives, regardless of the currency exchanged, called a “law” or a “principle,” it is immutable and always relevant. For even in a “gift economy,” the means by which one participates is directly the result of a profit based economic model.
A software gift economy is no different. The developer of software is no different from a corn farmer. Both have a product to offer. As the corn farmer has to contend with crop damage from animals such a raccoons, so the software developer has to contend with those who would without permission or due exchange use his product. The farmer can accept some level of loss without any real damage to his viability as a producer of food. Deprecation of a large and ongoing level will put him out of business. His place will be taken by a more effective producer who will be able to better raise and bring to market a crop that others will be willing to buy. The software producer may not like the farmer plow and plant and reap a harvest. But both must have a return. Both must gain a return on their investment if they are to be able to meet their needs and the needs of those who depend upon them.
Stallman’s method of distribution reflects his own personal choices. If what he offers is valued by the market place, he will be applauded. In the market place this is called “profit.” If other suppliers are able to meet the demands of the market place with a product that is valued by the market place, these suppliers will be applauded. Again this is called “profit.” If someone chooses to accept a lesser level of profit, that is their choice expressing their individual free will. If a lesser level of profit is imposed by the will of others, it is equivalent to the barroom gang rape of a prostitute who is then given $10 and told to “Shut up!” Regardless of what the rapist and onlookers might say, not only has a criminal act occurred, not only has she been abused, but she has been cheated for not withstanding the $10 offered a fair exchange has not occurred for she has not been compensated according to the price for which she would set for her services.
A gift economy is a artificial construct that can only endure if participants willingly accept a lesser result than otherwise obtainable in a genuine market economy. It is only sustainable by the voluntary giving of support of participants. Together their giving must be of such a level that the organization is enabled to pursue its goals within that everyday reality which is the market economy. For example, the monasteries that came into being during the European Middle Ages were for the most part self contained economic units. Yet they could only meet the needs of their participants by those individuals accepting a lower quality of life, a surrender of personal freedom and self-determination and by participating with the exterior market economy that was the norm of the larger society.
Unrestrained capitalism is not the enemy of society. It is simply the expression of a developing market economy. Human dignity is more likely to be valued within the market economy that permits individuals to determine for themselves how they will live their lives. Just about any effort to “temper” the ruthlessness of a market economy comes at the cost of personal freedom. To coerce, manipulate, force anyone to enter into such a construct is akin to the afore mentioned barroom rape. No matter how one later describes it, no matter how one later tries to massage the truth about what happened, no matter how many might say the experience and result are “fair” and “equitable,” it is nothing but a criminal act, an abuse of an individual and a complete disregard for that right that is most fundamentally human.

At 4/03/2007 4:49 AM, Blogger Steve Hayes said...

Thank you, Patience Str... oops, I mean Ayn Rand, for those kindly words of wisdom.

At 4/03/2007 12:21 PM, Blogger BruceA said...

truevyne -

In much of my work lately I must use Open Office (free shareware) to view online documents from others.

Open Office is a good example of software released under Richard Stallman's GNU licensing system.

Steve -

Marxists and free enterprisers turn economics into a religion

I think the anonymous comment proves your point.

At 4/04/2007 4:45 AM, Blogger Steve Hayes said...

Indeed anonymous proves the point - we must all bow down and worship the idol of the marketplace. And to fail to do so is a crime. Can you hear those sackbuts calling?

At 4/06/2007 6:06 AM, Anonymous OneOfMany said...

Centuries ago Galileo turned his telescope toward the heavens. The conclusions he reached were by many ridiculed and rejected. As a child I remember when man first set foot on the Moon. Throughout the world reports of this achievement were greeted not with ridicule and rejection but celebration. Those who simply could not bring themselves to believe the overwhelming evidence of this accomplishment were understood to be fundamentally out of step with reality. The same is true of those who can not seemingly grasp the dynamic of economic relationships. Sincerely. OOM.

At 4/10/2007 1:22 AM, Blogger Steve Hayes said...

The same is true of those who can not seemingly grasp the dynamic of economic relationships

That depends on which denomination one belongs to.

For some there is no god but The Market, and Ayn Rand is his prophet.

For others there is no god but the Dialectical Forces of History and Karl Marx is her prophet.

At 4/11/2007 10:06 PM, Anonymous OneOfMany said...

With respect, I can not understand why one would be so seemingly resentful of that reality of economic relationships that is the norm of everyday life! Some imagine unrestrained capitalism to be a monster that devours and destroys. But apart from the free market, I am not aware of any system of exchange that affords any greater fairness and justice and opportunity for those who participate. Floods of immigrants, legal and illegal, do not come to this country to be victimized but because they see available in our free market economy the very freedom, opportunity and justice not to be found elsewhere.
To say this does not make an idol of the free market economic system nor does it make one a worshipper of the system. To say this is simply to state what is true. I speak not as one who has spent years studing economic systems but as one who has actively participated in the free market system, who has by experience both bitter and sweet learned how to manage with some success within what is a constantly changing business environment. Based on that experience I think a better more equitable system by which people can exchange value and build wealth does not exist. If such a system could be offered, I for one would be glad to know of it. Sincerely. OOM.

At 4/16/2007 10:10 PM, Blogger Steve Hayes said...

There is another interesting post about this here.

I suppose the key question to ask OOM, is whether you are a Christian, and whether you can justify this from a Christian viewpoint.

At 4/17/2007 6:08 PM, Anonymous OneOfMany said...

Interesting. Throughout the course of this discussion I had not thought to question anyone's commitment to Christ. Because I see things differently, it would appear that my commitment to Christ is in the eyes of some suspect. That is an opinion to which they are of course entirely welcome. I am comfortable leaving judgement in this matter to God for He understands our thoughts and intentions far better even than we ourselves.

As regards the economic view to which I hold and with which others take issue, I could wish that reality were otherwise. Actually I do wish it were otherwise. Regrettably to pretend otherwise would require a suspension of reality that is beyond reason and experience.

As regards any justification of my economic view and how it applies to the issue of those who struggle with hard living and doing without, that is a subject that I learned not by observing others or reading about it in a journal or by sharing in a panel discussion. I learned that subject by hard living and doing without. I learned it during childhood. I learned it while a student first in college and later in seminary. I learned it as a husband and father. I learned it by first hand black and blue experience. I can show you my callouses and scars for I’ve done a lot of jobs that were not glamorous just simply hard and difficult, jobs that will never be featured on “Dirty Jobs.”

As regards hard living and doing without, I’ve never forgotten what it was like to have someone bring boxes of food to my home because they knew we didn’t have much. I’ve never forgotten a fellow pastor’s church taking up a love offering for us and buying my little girls heavy coats and hats because some of the ladies in the Sunday School knew my daughters didn't have proper clothing. I’ve never forgotten coming to church one Sunday to lead services and find that the members had collected food for us because they knew they weren’t pay enough for us to make ends meet. The humiliation and shame despair were crushing.

As regards hard living and doing without, that is a subject that I’ve tried to do something about by visiting with and spending time with and working with and helping poor people, hard living people, blue collar not well educated working class independent proud teeter tottering on the edge of economic crisis don’t want no handouts people who will not listen to you, to whom you have no right to speak until you have earned the right to speak to them by actually caring and trying to do something constructive to help them.

When it comes not to superficially but substantively helping vulnerable men and women get off the edge of uncertainty and find some stability and joy in life, it is our obligation in Christ by every means available to meet their needs and to help them meet their needs. Our first principle concern must be to tell them of Christ as Savior and Lord, to encourage and help each person to come to a point where they can feel comfortable placing their faith and trust in Him. It is our obligation in Christ to offer every help we can. That means feeding and clothing and shelter. It is our obligation to help and encourage those who are struggling that they might come to a point where they can take responsibility for themselves and their families. That means helping them find training and jobs so that they can take care of themselves and their children. There is more that could be said. Maybe the forgoing has not been well said. But it is a start. Sincerely. OOM

At 6/01/2007 3:07 PM, Blogger Christine said...

Interesting discussion. I was wondering if you have read Ched Myers booklet on Sabbath Economics? I think he has some interesting and very challenging things to say about a Biblical view of economics that is very pertinent to this conversation


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