The free market (A response to Kenny part three)

You can read this post without having read the posts linked below but it started with me writing this. So, you're an anarchist?

Which prompted my good friend Kenny to write this. As long as it's voluntary & non-aggressive, who gives a damn how others live? (a response to @pomperipossa's "So, you're an anarchist?")

You can read part one of my reply here. We can't afford to be snowflakes, you have to deal with the fact that someone might offend you! (A reply to Kenny part one)

And part two here. Capitalism (A reply to Kenny part two)

As I said in my previous post I believe people can promote cooperation over competition within the frame of the free market. Although, I don’t think there is anything evil about competition, or cooperation for that matter. I think it would be inappropriate to always compete with your friends, spouse, or your children. I also think it would be inappropriate to always work together with every person on the planet. 

Competition doesn’t have to be a hostile act, it’s actually a way of cooperating with people that you don't even know. A great example of this is the short book I, Pencil which describes how a pencil is made despite the fact that no single individual is capable of making one. People compete in sports and games all the time, as long as you play fair and by the rules, you can still be friends.  

The farmer from my previous post has more options than just consuming or investing his food crops (capital) in future productivity. He might choose to save some of his food crops for future consumption, in case of a bad harvest next year. He could trade it for services, goods or money (which is also a good). Maybe he decides to give it away. Perhaps he loans it to someone else with or without interest. 

He could even do things that destroy his capital, like burning it or burying it in the ground and pour salt on it. Of course, this isn’t helping anyone and some people might be tempted to relieve him of his capital by using force or threatening him with the use of force. You could argue that this is a good idea, you could even make some good arguments, however, that would not be part of the free market. 

Now, I don’t think it’s a good idea to destroy capital. The reason I would advocate staying within the realm of the free market is because of the slippery slope. Maybe I join some other people in relieving the farmer of his capital. Let's say we kill him or lock him up, what’s the harm in that? 

Well, maybe my neighbor and I make an agreement that I lend some food or “capital” to him for the period of one year. And let’s say this causes me to be hungry every day for a year because I now have less food in the present. To compensate me for the sacrifice I make, my neighbor offers to pay me back 10% more food or “capital” at the end of the year. In this scenario we both think that we will be better of when we make the agreement, how do we know this? Well, it’s self-evident. Everyone has a list in their heads of the things that they value, this list is a ranking. In our scenario my list is. 

1. Increasing my food supply by 10% in one year. 
2. Not going hungry for one year.     

This means I value 1 higher than 2.

My neighbor, on the other hand, has his own list.

1. Borrowing food for one year at an interest rate of 10% to invest in increased future productivity.
2. Going hungry for one year to invest in increased future productivity.

This means my neighbor values 1 higher than 2. If 1 and 2 were reversed on both or one of our lists we would not come to this agreement. That's all fine and dandy except I forfeited my right to not be aggressed against when I aggressed against the other farmer that was destroying his capital. Someone might claim that it is wrong to collect interest and that I am exploiting my neighbor. Of Course, that’s not the case because he chose to take the loan from me as I explained above. The precedence that was set when we took the property from the capital-destroying farmer was that it is okay to neglect property rights if it is in the best interest of the community. 

What is in the best interest of the community? Well, if we look at history and learn from it, it’s obvious to me that respecting property rights, excepting the fact that you might feel offended sometimes, and having a functioning dispute resolution is best for the community in the long run. Even if one individual decides to destroy his own capital, which is negative in the short term it’s not worth it. Without property rights, things get very arbitrary and decisions are made about other peoples property. The bad decisions also affect way more people. The EU in recent times, and the US during the 1930s, for example, decided to destroy food (capital). Because they don’t understand economics and/or because they didn’t face any immediate and personal negative consequences. In fact, the politicians perceived that they would personally gain from destroying someone else's capital, otherwise they would not have done so. The capital destruction was not paid for by the politicians that made the decision. It was paid by the taxpayers and the consumers that had no say in the matter. This is a very dangerous path to go down. 

The scenario with the farmer destroying his own capital is very unlikely to happen since he immediately pays for his action. If you made a survey asking people if they would burn all of their belongings most would probably say no. Most of the people that answered yes would do so without actually burning their belongings, thus revealing their real preference.     

The reason I’m such a strong advocate of the free market is the same reason that I’m a strong advocate of the fact that none has the right to not feel offended. I’m not saying a free market would be heaven on earth, there would still be some problems and suffering. But I am sure that political correctness and the disrespect for private property leads to a deteriorating system. You start using violence to try to solve problems and you silence anybody that questions this practice or points at a different solution. It deteriorates into hell on earth, and the road to hell is paved with good intentions.