A Dim View of Libertarianism

Ernest Partridge

III

Market Fundamentalism

 

"The economist . . . keeps the motivations of human beings pure, simple and hard-headed, and not messed up by such things as goodwill or moral sentiments... [T]here is ... something quite extraordinary in the fact that economics has in fact evolved in this way, characterizing human motivation in such spectacularly narrow terms. One reason why this is extraordinary is that economics is supposed to be concerned with real people. It is hard to believe that real people could be completely unaffected by the reach of the self-examination induced by the Socratic question, 'how should one live?'" Amartya Sen1

Libertarians accept the conviction of neo-classical economists that “the free market,” unconstrained by government oversight and regulation, will always produce better results than markets directed by legislation. The free market, they insist, resulting from the “utility maximizing” transactions of numerous autonomous buyers and sellers, “spontaneously” establishes prices and prompts entrepreneurial decisions that yield the best outcome for the society in general. “Good for each, good for all.”

“The wisdom of the market place” is epitomized by the concept of "the invisible hand," cherished by libertarians, which has its origin in Adam Smith’s Wealth of Nations.

[The individual] neither intends to promote the public interest, nor knows how much he is promoting it... [H]e intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.

An unyielding faith in the infallible beneficence of "the invisible hand," leads to "market fundamentalism" – the doctrine that whatever government attempts, privatization and the free-market can do better.

“[T]he free market allows more people to satisfy more of their desires, and ultimately to enjoy a higher standard of living than any other social system... We need simply to remember to let the market process work in its apparent magic and not let the government clumsily intervene in it so deeply that it grinds to a halt."  (David Boaz)²

"A free market [co-ordinates] the activity of millions of people, each seeking his own interest, in such a way as to make everyone better off... Economic order can emerge as the unintended consequence of the actions of many people, each seeking his own interest." (Milton and Rose Friedman)³

Accordingly, the libertarians argue, governments should never interfere with markets. Furthermore, governments should not own property, which is better managed by private individuals. In short: let the free market decide. The mysterious “invisible hand” of the free market will “[allow] more people to satisfy more of their desires” (Boas), and “make everyone better off” (Friedman).

The dogma of market fundamentalism gains some credibility from the fact that it is at least a half-truth, indicated by Adam Smith's qualifiers, above: "may be" and "in many other cases." No doubt, the individual’s striving to maximize self-interested gain accounts for numerous improvements in the quality of life in industrial countries. Presumably, the inventors and developers of computers and the internet were more concerned with their own economic prospects than they were of the "social benefits" thereof. (As a result of his economic success, Bill Gates’ benevolence was manifested later with the establishment of The Gates Foundation). Similarly, many scientific, scholarly, technological and artistic achievements, motivated primarily by self-interest and self-satisfaction, benefit society at large "as if by an invisible hand."

From the undisputed truth that some, or perhaps even most, market activity yields benefits, the market fundamentalist concludes that the unregulated market never fails to be beneficial to all; the belief, in other words, that there are no malevolent effects of unconstrained market activity, no "back of the invisible hand."  Thus the market fundamentalist replaces Smith's "may be" with "always." From this belief follows the insistence that the free market is self-correcting, and that there is thus no need for regulation – that, in Ronald Reagan’s enduring words, "government is not the solution to our problems, government is the problem."

Market fundamentalism is a "dogma" in the same sense that creationism and biblical inerrancy are dogmas; it is accepted "on faith" despite clear and compelling evidence that it is false. Not that this significantly alters the convictions of the libertarian and regressive true-believer, any more than the existence of fossils or the science of molecular biology inclines the religions fundamentalist to accept evolution.

Be that as it may, for those open to evidence and plain common sense, here are a few compelling reasons to reject the dogma of market fundamentalism – reasons to believe that what is good for an individual buyer or seller or corporate stockholder may not be good for the public in general.


A Fictitious Person in a Mythical Environment.

Neo-classical economic theory, from which libertarian market fundamentalism is derived, can be seen at once to be inapplicable to the “real world” of actual economic activity. And, of course, the “real world” is and must always be the only world that we all live in. This mismatch between theory and application follows from the central concepts of neo-classical economics: “economic man” and “the perfect market.” A fictitious person acting in a mythical environment.

Economic Man (Homo Economicus). In neo-classical economic theory, “economic man” is a hypothetical individual who is a complete egoist, motivated solely by the self-interested desire to maximize his “preference satisfaction.” Homo Econ’s motivation is manifested by his willingness to pay for these satisfactions in a “free market.” Neo-classical theory also postulates that “all goods that matter to individuals ... must be capable of being bought and sold in markets” and “anything that is valued instrumentally ... can be handled by economics, be it acts of friendship or love.”⁴  “Economic man’s” behavior is described, in neo-classical jargon, as “rational.” By implication, the self-sacrificing behavior of saints and heroes is “irrational.”

Clearly, “economic man” exists nowhere outside of Ayn Rand’s novels and, perchance, on Wall Street. And this is fortunate, for we wouldn’t want him for a neighbor.

In fact, there is much more to a fulfilled and moral life than self-interested “preference satisfaction.” Such a life also includes values that can not be priced in a free market. Among them:

• Truth. Scientists and scholars offer evidence and sound arguments, not bids. In courts of law, purchased verdicts are not only invalid, they are crimes.
   

• Civic Values such as justice, due process, civil rights, and the franchise, should not be for sale. The governing impulse of economic man (qua consumer) is “I want.” The governing impulse of the citizen is “we need.”
   

• Distributive Justice. The economic concepts of “efficiency” and “utility maximization” do not touch upon the moral issue of the just distribution of wealth. “Just compensation” and "fair distribution" are moral, not an economic, concepts. A slave economy can, in classical economic theory, be perfectly “efficient” (i.e., "Pareto Optimal").⁶
   

• Love, friendship and loyalty which is bought is less valuable than that which is given freely. As philosopher Mark Sagoff reminds us, “a civilized person might climb the highest mountain, swim the deepest river, or cross the hottest desert for love, sweet love. He might do anything, indeed, except be willing to pay for it.”
   

• Moral values, which refer to the worth of persons, are systematically excluded from neo-classical economic theory.

A public policy for “economic man,” systematically detached from criteria of truth, civic value, distributive justice, friendship and loyalty, is a policy that any civilized person should reject, and he should reject it on non-economic grounds.


The Perfect Market.

Consider next the conditions that define “the perfect market:”

• All participants are “perfectly rational,” utility maximizing egoists – i.e., are “economic men.”
   

• There are many participants in the market.
   

• Competition is “perfect” – there is no collusion, cartels or monopolies.
   

• All participants have access to all relevant knowledge.
   

• There are no transaction costs.
   

• All transactions are mutually beneficial.
   

• There are no externalities – i.e., no consequences to non-participating and non-consenting “third parties”. (See the following section).

Clearly, there are no “perfect markets” anywhere on earth, apart from the imaginations of economists and libertarians. For consider:

(a) “Economic man” is a myth, or at the very least extremely rare. As noted above, most individuals engage in economic transactions for several reasons, some of them non-economic.

(b) Participation in markets is restricted to those with the ability to pay. Public policy decisions, on the other hand, should involve the rights and welfare of many who are excluded from market activity; namely, the very young, the very poor, animals, and future generations.

(c) Unregulated markets are self-eliminating, because capitalists detest competition and strive constantly to eliminate it. The remedy? The enforcement of anti-trust laws and regulation, which means, of course, “interference” by governments in the marketplace.

(d) The multi-billion dollar advertising and public relations industries are devoted to the task of persuading rather than informing. And persuasion involves the withholding of relevant information (e.g. health risks) and the dispensing of distorted and false information. Caveat Emptor!

(e) All transactions in the real world exact costs. Among them are the costs of enforcing the laws required for markets to take place at all (e.g. fair disclosure, patents and copyrights, contracts, civil and criminal courts, etc.), and this of course means government, which is so despised by “free marketeers.”

(e) Transactions are frequently not mutually beneficial, due to fraud (i.e., violation of the “relevant knowledge condition”), the remedy of which is civil suits, which requires the “transaction costs” of the enforcement of law and the appeal to courts -- ergo, government.

(f) External costs of market transactions are more the rule than the exception. Innocent, non-consenting parties are routinely impacted by economic activity. Among these external costs are environmental pollution, urban decay, public health costs, etc. Third-party “stakeholders” have no say in economic transactions. Their only recourse for protection and compensation is the sole agency legitimately established to represent all citizens: the government. (See my “Market Failure: The Back of the Invisible Hand").

Summing up: “Economic man” and “perfect markets” are abstract constructs which, due to their clarity and simplicity, allow theoretical economists to devise complex mathematical models. However, they have no counterparts in the real world, which compromises the application of these abstract concepts in public policy.

Case-In Point: Milton Friedman on Free Trade. Foreign trade and currency exchange rates provide a vivid example of the rule, “The theory is beautiful, but reality is baffling.”

According to free market theory, foreign exchange rates should be self-regulating, negative feedback functions, like house thermostats. The heat rises, the furnace shuts off, the heat drops, the furnace kicks in, perpetuo moto.

Similarly with foreign trade. If there is a “trade imbalance,” say between Japan and the United States, as dollars go to Japan and consumer goods are imported to the U.S., the Japanese will acquire a surplus of dollars causing the value of the dollar to fall with respect to the yen. U.S. consumer goods will then be less expensive than Japanese products, thus encouraging a flow of the yen to the U.S. to purchase American goods. Then the value of the dollar will rise until foreign goods once again become competitive. And so on, back and forth, like a thermostat. It’s all perfectly automatic – a “spontaneous order,” as the libertarians call it – no governmental interference (e.g. tariffs) required.

This is how Milton Friedman describes it:

If foreign exchange rates are determined in a free market, they will settle at whatever level will clear the market. The resulting price of the dollar in terms of the yen, say, may temporarily fall below the level justified by the cost in dollars and yen respectively of American and Japanese goods. If so, it will give persons who recognize that situation an incentive to buy dollars and hold them for a while in order to make a profit when the price goes up. By lowering the price in yen on American exports to Japanese, it will stimulate American exports; by raising the price in dollars of Japanese goods, it will discourage imports from Japan. These developments will increase the demand for dollars and so correct the initially low price.⁷

In theory, it’s all very neat and so simple: “all things being equal and constant.” But in the real world, “all things” are never equal and constant. Instead, the ecologist’s rule applies: “you can’t do just one thing.”

What if that flow of dollars abroad is accompanied by a dismantling of the U.S. industrial base? Then, when the time arrives for U.S. manufacturing goods to be competitive with foreign goods (due to the weakening of the dollar), there will be no more American-made goods on the market. Moreover, with the outsourcing of U.S. jobs overseas and the decline of median disposable income, fewer American can afford to buy foreign consumer goods. Regressive tax rates cause the nation’s wealth to flow to the very rich, who send their investments abroad in outsourced industries. A shrinking tax base results in a disintegrating physical infrastructure and a decline in higher education, followed by fewer scientists and engineers, and less basic research and development. Thus today the United States excels only in military technology, as it needlessly spends more on the military than all the rest of the world combined, building 3.5 billion dollar aircraft carriers to fight an “enemy” without an air force, and billion dollar submarines to fight an “enemy” without a navy.

This is what happens when public economic policy is abandoned to “the will of the free market” – an abstraction with, we are expected to believe, a benevolent “mind” of its own. This is what happens when a government puts the fate of the nation’s economy in the hands of wealthy individuals and corporations; individual agents without social conscience and with nothing more than their short-term profits in mind.

In the face of such grim realities, the neat self-correcting,  “negative feedback” model of Milton Friedman’s free-trade theory is irrelevant. It belongs to the abstract world of “theory,” not to the real world. In the real world, the thermostat is broken, the furnace will not turn on: down, down, down, goes the temperature


Market Failure and the Problem of Externalities:

What market fundamentalists (unlike Adam Smith) fail to notice, is that not all workings of "the invisible hand" are beneficial.⁸ Some unintended consequences of free market activity are harmful -- "the back of the invisible hand." Economists call these "market failures."

One cannot enroll in an Introduction to Economics class, without encountering the concept of “market failure” – the acknowledgment that a totally unconstrained and unregulated free market can, at times, have socially undesirable consequences (as I will exemplify below). It is one of the most obvious and incontrovertible facts of applied economics. Almost all of us are aware of market failures, whether or not we have ever studied economics.

Some students of Econ. 101 choose to major in Economics, and a few of these earn doctorates in the field. Those scholars who go on to work for The Heritage Foundation, The American Enterprise Institute, The Cato Institute, and other such “conservative” and libertarian think-tanks somehow manage to forget about “market failures.” The free unregulated market, they tell us, always brings about the socially optimum result.

Practical experience tells us otherwise:

• The unconstrained chemical industry promoted pesticides and caused extensive damage to the ecosystem, until the public and then the government, aroused by Rachel Carson’s book, “Silent Spring,” put a stop to it.
   

• Similarly, the chemical industry strenuously resisted demands that it cease the manufacture and distribution of chloro-fluorocarbons (CFCs), when atmospheric scientists discovered that the CFCs were eroding the stratospheric ozone, which protects the earth’s inhabitants from ultra-violet radiation. Once again, the federal government, joined by the governments of other industrialized nations, enforced a ban on CFCs.
   

• Scientific warnings about global climate change (“global warming”) were countered by “junk science” sponsored by the energy industry. Now, at last, as the fact of climate change becomes undeniable and widely acknowledged, the same industry is promulgating the “line” that climate change may not be all that bad, and might even be beneficial. Clearly, mankind can not count on private enterprise to solve this grave crisis. Only international agreement among the industrial nations will suffice. Meanwhile, the regressive right, on behalf of its “sponsors” the energy industry, is resisting international action.
   

• Reduced labor costs yield increased profits and increased dividends to the stockholders of the corporation. Thus, if workers abroad accept wages that are a fraction of the wages demanded in the United States, then the "responsible" policy of the corporation executives is to re-locate jobs abroad: "outsourcing."  In fact, the law stipulates that the primary responsibility of the corporation is to its stockholders.  (It's called "fiduciary responsibility," about which much more in the fifth essay).  The consequences to the displaced workers, and eventually to the national economy, is devastating. But strictly speaking, that is not the concern of the corporation. Not, that is, unless the government intervenes with tariffs, tax incentives, regulations, and laws.  (See my "The Outsourcing Tragedy").
   

• Finally, the tobacco industry, whose corporate responsibility to its stockholders is to maximize profits, successfully marketed its products to the point where half of the US population were smokers. As a result, almost a half million Americans die prematurely each year – nearly twice the total US casualties in World War II. Today, only a fifth of adult Americans are smokers. No thanks to the industry. Once again, government intervention, vigorously and persistently opposed by the tobacco industry, has curtailed marketing and has publicized the health hazards of smoking, saving the health and lives of millions.

We are all quite familiar with these “market failures,” and many more. It is obvious that, in numerous undeniable cases the unregulated free market fails to “make everyone better off,” as Milton Friedman would have us believe. So why, if market failures are so compellingly obvious, should we even bother to mention them? The answer is that our present government is dominated by individuals who behave as if they don’t recognize these malevolent consequences of free markets. So one after another, regulations and laws designed to correct market failures are being dismantled, as government regulatory agencies are staffed with lobbyists and officers from the corporations that these agencies are charged to regulate.

But why do markets fail to produce optimal results for society at large? Railroad tycoon, William Vanderbilt (1856-1938), said it all: “the public be damned, I work for my stockholders.”  ("Fiduciary responsibility" again). Moreover individual entrepreneurs and workers also want and strive for what is best for themselves. Indeed, as any neo-classical economist will insist, personal want-satisfactions (e.g., profits) are what drive an economy.

Implicit in market fundamentalism and libertarianism is the belief that what is best for each individual and each corporation is best for all individuals – in other words, for “society at large.” As President Eisenhower’s Secretary of Defense, Charles Wilson, allegedly put it: “What is good for General Motors, is good for the country.”

Because market fundamentalism, like "young-earth creationism" and biblical literalism, is a dogma, it is untouched by hard evidence and practical experience. "Market -- good; Government -- bad. Period! Now don't confuse us with the facts."

Those who are not captivated by the dogma of market fundamentalism (i.e., most of us), know better. We trust the scientists who tell us that pesticides damage the ecosystem, that CFCs erode the ozone in the stratosphere, that the continuing use of fossil fuels is changing the climate. And we know that smoking causes lung cancer and premature death – the cigarette packs tell us so, not because the tobacco companies warn us out of a sense of social responsibility, but because the government requires them to print the warnings.

Government regulation, and laws restricting commercial activity, arise, not from dogma, but through accumulated practical experience and political action. As human institutions they are imperfect, which means, to be sure, that they are sometimes excessive. The appropriate response to “insolence of office” is reform, not abolition of the office – reform guided by the same processes of practical experience and enacted through political action.


The Third Parties Problem.

It is an article of faith among libertarians, a faith undiminished by the historical record or practical experience, that the unregulated free market of self-serving buyers and sellers will, “as if by an invisible hand,” yield the optimum social benefits. Accordingly, as Milton Friedman notoriously proclaimed in the title of his 1970 New York Times article, "the social responsibility of business is to increase its profits.”⁹ End of story.

This reassuring dogma conveniently neglects the “third parties” to economic transactions: the “stakeholders” – individuals affected by the transactions without their informed consent. These include individuals residing downwind and downstream from polluting industries, taxpayers who must pay for the medical costs of smoking, citizens at risk of injury or death from toxic chemical releases, homeowners near airports, and most recently, the tax-paying public, present and future, that has been presented the bill for rescuing Wall Street. Add to these, the customers who are not informed of the consequences of their purchases: teen-agers induced to take up smoking, consumers of insufficiently tested drugs, etc. If the stockholders of a corporation are dissatisfied with the profit-making of the corporation, they can fire the managers. But who, other than the government, speaks for the stakeholders? The costs of these third-party “externalities” do not figure into the profit-maximizing plans of corporations, unless those costs are imposed by force of law and regulation, which is to say, by government.

There is another remedy, say the libertarians: the threat of law suits by individuals harmed by corporate irresponsibility. Unfortunately, the regressive Congresses and administrations have pulled the teeth from this watchdog by enacting so-called “tort reform” – limitations on awards to plaintiffs. So today, damage claims by customers and stakeholders are simply regarded by large corporations, as “the cost of doing business.” I will have much more to say about “the courts and torts” remedy for market failures in the next essay.


Why Not A Free Market in Murder?

If, as the fundamentalists insist, the unregulated free market always results in benefit for "everyone" why not allow a "free market" in child pornography, or extortion ("the protection racket"), or murder for hire?

The libertarian is compelled to reply, "because such activities harm or violate the rights of innocent persons." With this admission, the libertarian gives away his dogma. For by this admission, he concedes that in some readily identifiable cases, what Robert Nozick dubs the right to engage in "capitalist acts between consenting adults" can, at times, be trumped by the rights and the welfare of innocent, unconsenting and non-participating third parties.

But if so, if there are legitimate reasons to outlaw extortion, child pornography and murder for hire, why then not also outlaw, or at the very least regulate, the sale of tobacco products and junk food, for-profit health insurance, junk bonds (CDOs) and hedge funds, and why not forbid the privatization of prisons, of warfare, and most fundamentally, the privatization of government through unlimited corporate campaign contributions?

I submit that while there may be a difference in degree between the prohibition of murder for hire on the one hand, and the sale of cigarettes and junk food and the privatization of warfare and government on the other, there is no difference in kind. All these activities harm and violate the rights of innocent and unconsenting victims.

Between, say, the "free market" in such services as auto repair and hair styling (acceptable) and the "free market" in extortion and murder (unacceptable) there is a vast "gray area" of economic activity in which the advantages of market activity may or may not be outweighed by harm to innocent others. Toward the "light gray" end of this continuum, caveat emptor ("let the buyer beware") may suffice to minimize abuses by sellers and entrepreneurs without the intervention of the law and government. However, in the "dark gray" side of the continuum is found those transactions that cause unacceptable harm to innocent and unconsenting third parties. Also in the "dark gray realm" are those transaction wherein the potential customers are totally incapable of knowing the consequences of their transactions (e.g., the sale of prescription drugs) or whose judgment is overwhelmed by the black arts of public relations and advertising (e.g., junk food sales to children and cigarette sales to teen-agers). According to "free market theory" of neo-classical economics, each participant in an economic transaction possesses "perfect knowledge," which is one of several reasons why it is compellingly obvious that there is no such thing as a "perfect market" outside of the publications of these economic theorists. And all of us, neo-classical economists included, are compelled to live in the real world.


Conclusions:

Once the high-pressure political rhetoric and the high-fallutin’ scholarly jargon is set aside and undeniable economic and social facts are brought to the fore, the conclusion is inescapable: totally unregulated, laissez-faire capitalism cannot work, and attempts to make it work lead to oligarchy: opulent wealth for the very few, poverty for all others, and the disintegration of social order and the just rule of law. In addition to all that, oligarchy leads, paradoxically, to the destruction of the free market for, as history testifies and we are discovering anew in the daily news, oligarchy detests competition and leads to monopolies. Hence "mergers and acquisitions."

Equally obvious is the remedy for all this: government regulation and the rule of law – law based, not on neo-classical economic theory, but on historical experience and fundamental moral principles.

Government is essential, for no complex social activity, markets included, can take place without rules, referees to enforce the rules, and sanctions to deter the violations of these rules. Markets, after all, are essentially games: they are cooperative, rule governed, and goal oriented, and the success of each "player" is contingent upon the behavior of the other players. Thus a market without rules, referees, and sanctions (i.e., laws and regulations) is unthinkable. And as with games, the referees, rules and sanctions must be supplied by a neutral and unbiased entity. What else could this be, but government – that institution established by the public at large to protect each individual’s rights not to be harmed by "capitalist acts by consenting adults."?

How then have the regressives succeeded in foisting a belief in the dogma of market fundamentalism upon a sizeable portion of the United States population, including the media and a majority of the U.S. Congress? They have accomplished this through the expenditure of vast sums of private money in support of "think tanks," in the purchase of media, and in political campaign contributions.

But what cogent arguments have been presented in support of the dogma? Very few, I submit. The widespread acceptance has been accomplished through simple repetition, devoid of argument and rich in the rhetoric of "freedom." About the only supporting argument forms of note are anecdotal evidence and false generalization. Supporters of market fundamentalism cite examples of the benefits of free markets, and from that conclude that all "free markets" are always benign. However, as noted above, the fact that free market activity is often beneficial is not in dispute. Yes, we are all better off due to innovation, entrepreneurship and competition in the production of goods and the performance of services. This is the aforementioned "half-truth" of market dogmatism. But this half truth does not yield a whole truth. It does not follow from the admitted advantages of free market activity that there are never any harmful consequences thereof. Simple reflection, as noted above, yields abundant examples of what economists call "market failures" and "negative externalities."

"The Reagan Revolution" of 1981 ushered in the grand experiment in applied market fundamentalism. Before more and greater harms befall us all, it is past time for the people and the government of the United States to recognize and to proclaim that the experiment has failed.

We have learned what we need to know about the attempt to institutionalize this dogma, and it is time now to return to proven modes of governance: the rule of law, the protection of the environment and common resources, just distribution of the fruits of our combined and coordinated labor, and the subordination of economic activity in the service of the public good. It is time, in short, to bring back the rules, the umpires and the sanctions. Time to scrap the ethic of "you are on your own," and to restore the ethic of community: "we’re all in this together."

The liberal economist, James Galbraith, concurs:

“A new spirit of pragmatism surely requires that we discard the metaphor of market determinism – whole and entire. No more, let us bow and scrape before that altar. Markets have their place – they are a reasonably open and orderly way to assure the distribution of services and goods. They are not a general formula for the expression of social will and the working out of social problems.”
 

Markets and privatization. If, as the market fundamentalists insist, free markets will always produce superior results than government management, then it follows that all government activities (with the exception of the protection of life, liberty and property), should be privatized. And so today, we constantly hear and read about regressive proposals to privatize the national parks, the postal service, Social Security and Medicare, etc. And half of the traditionally military functions in Iraq have been turned over to so-called “private contractors.”

So why not privatize practically every public function? We will address that question in the next essay.

 

4.    The Privatization Panacea

 

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NOTES AND REFERENCES

1. Amartya Sen, On Ethics and Economics, Oxford: Blackwell, 1987, pp 1-2.

2. David Boaz, Libertarianism, a Primer, New York: Free Press, 1997  p. 40, 185.

3. Milton and Rose Friedman: Free to Choose, New York: Harcourt Brace Jovanovich,  pp 13-14.

4. A. Myrick Freeman, "The Ethical Basis of the Economic View of the Environment," The Environmental Ethics and Policy Book, Belmont, CA: Wadsworth, 1994. P. 307, 309.

5.  Steven Edwards, "In Defense of Environmental Economics," Environmental Ethics, 9:1 (Spring, 1987), p. 79.

This reduction of all values to economic costs is the foundation of economic cost-benefit analysis, upon which much legislation and government regulation is based. For my critique of economic cost-benefit analysis, see my “Why Economics Fails as a Sole Foundation of Public Policy,” in Chapter 10 of Conscience of a Progressive.

6. “Pareto optimality” obtains when no transactions are possible that do not result in some individual ending up worse off.

7. Milton and Rose Friedman, Free to Choose, p. 47.

8. In words that libertarians are reluctant to cite, Adam Smith also wrote in The Wealth of Nations: "People of the same trade seldom meet together but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."

9. Milton Friedman: “The Social Responsibility of Business is to Increase Its Profits,” The New York Times Magazine, September 13, 1970.