Libertarians and those of their ilk like to make the point that with government completely out of the way, the free market will decide fairly what survives and what doesn’t. The result will be a near utopia, where all are free to do precisely as they please and life will be happier for all those involved. People will, rather than struggle against the onus of government regulation, act in their own self-interest. As a result, they will find that there really is no need for government intervention, since the market will decide what succeeds and what fails. (The end resulf of this system is technically called "anarchy".)

I’m not trying to be particularly political here. It’s a fact that most people in the U.S. tend to be more or less libertarian in terms of their view towards government (translates to: “get out of my business”). They don’t really care that much what other people do in their own homes, and for the most part they don’t want government telling them what size sodas they can drink, what kind of language they can use, etc. And you really can’t blame Americans for feeling this way. After all, America as a nation started from sentiments like this.

And to be fair, government is almost the worst kind of blunt instrument when it comes to the shaping of behavior. People generally don’t want their behavior shaped in the first place, and government typically does a very poor job of it.

But here’s the problem with arguments which posit that “the market” will serve to regulate human behavior. Let’s take what could be an extreme example, elevator (lift) manufacturers. Let’s say that the government decides they have no role in regulating this part of the economy. These manufacturers are free to, as the libertarians say, “act in their own self interest”. Otis Elevator Company is the world’s largest manufacturer of vertical lifting systems. In our hypothetical free market, Otis is free to make any kind of elevator they like. The idea is that will make safe, adequately engineered elevators, because if they don’t, they will lose market share and their business will eventually fail.

While the above is probably true, it’s important to look at what happens in the meantime. That is, while the market sorts out the field of elevators. Otis, as a corporation serves two masters: its customers and its stockholders. The stockholders really couldn’t care less what Otis does or how, so long as the share price continues to rise, and they can make a profit on the purchase and sale of Otis stock. Otis customers just want an elevator which lets people easily go up and down without incident.

But what if, freed of government oversight, Otis acts in its own best interest and delivers elevators which aren’t quite well engineered, and aren’t as safe as they might be under government regulation. Libertarians might say that eventually Otis would put itself out of business if it failed to deliver well-engineered lifts. The public would vote with their pocketbooks, and go elsewhere for their elevators.

This is all well and good, but what about the people who might suffer before the market makes the adjustment the Libertarians believe it would? What about those who died in high speed plummets to their deaths in Otis elevators? How many deaths would it take before people went elsewhere and Otis did a better job of engineering their elevators? More sinister, how much would Otis pay to ensure news of deaths never made it to your local newspaper?

Of course, it could be argued that at one time this actually was the case. There were deaths from weakly engineered elevators, and Otis found a way to prevent such catastrophes. The same thing is true in aircraft, for example. The de Havilland DH 106 Comet was the world’s first commercial jetliner. It featured, among other things, square windows. The problem was that no one realized square windows tended to cause cracks in the fuselage under flight conditions, and quite a few people died before this flaw was discovered and corrected. Whether more or fewer people would have died without government scrutiny of this problem is an open question. de Havilland eventually discovered the flaw and redesigned their aircraft, and other manufacturers used oval rather than square windows as a result.

Of course, it’s assumed that Otis and de Havilland were horrified when their poorly engineered products resulted in customer deaths. But what about General Motors, the U.S. manufacturer of automobiles? One of their most recent scandals involved a defective ignition switch which resulted in 124 deaths before it was publicly discovered. In GM’s case, the defective switch was in use over a number of years in a variety of car models, and was known to be hazardous long before GM attempted to do anything significant about it. GM did an analysis of the problem and reasoned this way: the number of deaths versus the number of switches was very few. The cost of a recall would be expensive. GM could quietly replace the switch in newly manufactured cars, and as long as no one discovered the weakly designed switch, they would not have to issue an expensive recall order. The deaths involved... well, those deaths could presumably be attributed to almost anything. Except it didn’t work out that way. The problem was discovered and GM was fined and forced to issue a recall. The issue here was that GM made the wrong decision when the problem was first discovered internally. They decided to simply redesign the switch going forward and keep the lid on the fact that there were millions of the defective switches installed in existing car models. The result was 124 deaths. The market didn’t take care of that one. Government did. And it’s probably a good thing.

The Libertarian free market argument only works up to a point. As long as people and companies act in their own best interest, a market free of government regulation might or might not work to the advantage of the greater population. But this more or less presupposes that people and corporations will act ethically and responsibly, and that the consequences of their actions will be instantly known to everyone. This clearly is not the case and never could be. There will always be people and corporations whose sole goal is to make money and to hell with the customer. And there will always be a lag between the time a problem arises and the time it’s made public. And there will always be those who don’t keep up with the times and are ill-informed when problems arise. All that adds up to victims and lots of them.

Naturally, we don’t want a government which constantly surveils us, which constantly dictates to us on the smallest private matters. And which constantly interferes with the progress of our lives by attempting to busybody in everything we do. Agreed. But government has a definite role to perform in, if not guaranteeing our safety, at least attempting to ensure it is not threatened too much or too readily.

And this is one of the weaknesses of the Libertarian argument. It simply isn’t adequate for “the market” to decide the results of the game, when the stakes are millions of people’s lives or billions in public and/or private funds.

It’s also worth noting that events can cause public over-reaction, when ignorant or unsophisticated portions of the population insist on courses of action which are unnecessary, in order to protect the people from something which isn’t really even a threat. Media can be manipulated. People can fail to investigate for themselves, preferring instead to simply swallow whatever their friends, family or the media tell them. This often results in government over-regulation, but when it doesn’t, it can still cause “the market” to react in ways which are non-sensical.

The free market is not a valid neutral arbiter of consequences. In fact, it can be anything but. At some point, it may well be necessary for someone (like the government) to step in and say, “Enough”. The point where this happens is the trick of making a government work for the people or against them.

I have nothing personal against Otis, or de Havilland, or GM or the government, per se. I recognize that these entities do act in their own best interests, which may or may not coincide with my best interests. But I also recognize that the free market and the environment surrounding it doesn’t necessarily act in my best interest, either.

And here’s something else to think about. Take the case of Wal-Mart. You may be one of those people who thinks that Wal-Mart is an evil corporation that steam rolls the little guys and pollutes the culture with its cheap goods and poorly paid workers. Etc. The government regulates Wal-Mart in only the most peripheral ways, meaning it is free to act in its own best interests all the time. And even if you hate the corporation for whatever reasons, the market clearly disagrees with you. They are one of the most successful retail sales companies in existence. The market has decided that. Same thing with McDonalds, another much and loudly hated corporation.

One last point. Markets can be and are manipulated. History is rife with examples of individuals and organizations doing exactly that. It probably happens more often than we realize. Ever heard of "insider trading"? Market manipulation is a case where the market acts only in the best interests of one or a few who do not have your best interests at heart.

So the next time some Libertarian tries to make the “free market” argument, consider the above.

By the way, don’t get the idea that I’m against Libertarians or that I don’t like them or something. Not true. But I believe that this part of their common arguments is weak at best.