Myth: All relations among humans can be reduced to market relations

When thinking about the difference between government action and action taken by free people trading voluntarily in markets, we find that many myths abound. Tom G. Palmer, who is Vice President for International Programs at the Atlas Economic Research Foundation, General Director of the Atlas Global Initiative for Free Trade, Peace, and Prosperity, a Senior Fellow at the Cato Institute, and Director of Cato University, has written an important paper that confronts these myths about markets. The nineteenth myth — All Relations Among Humans Can Be Reduced to Market Relations — and Palmer’s refutation is below. The complete series of myths and responses is at Twenty Myths about Markets.

Palmer is editor of the recent book The Morality of Capitalism. He will be in Overland Park and Wichita in May speaking on the moral case for capitalism. For more information and to register for these events see The Morality of Capitalism. An eleven minute podcast of Palmer speaking on this topic is at The Morality of Capitalism.

Myth: All Relations Among Humans Can Be Reduced to Market Relations

Myth: All actions are taken because the actors are maximizing their own utility. Even helping other people is getting a benefit for yourself, or you wouldn’t do it. Friendship and love represent exchanges of services for mutual benefit, no less than exchanges involving sacks of potatoes. Moreover, all forms of human interaction can be understood in terms of markets, including politics, in which votes are exchanged for promises of benefits, and even crime, in which criminals and victims exchange, in the well known example, “your money or your life.”

Tom G. Palmer: Attempting to reduce all actions to a single motivation falsifies human experience. Parents don’t think about the benefits to themselves when they sacrifice for their children or rush to their rescue when they’re in danger. When people pray for salvation or spiritual enlightenment, their motivations are not quite the same as when they are shopping for clothes. What they do have in common is that their actions are purposeful, that they are undertaken to achieve their purposes. But it does not follow logically from that that the purposes they are striving to achieve are all reducible to commensurable units of the same substance. Our purposes and motivations may be varied; when we go to the market to buy a hammer, when we enter an art museum, and when we cradle a newborn baby, we are realizing very different purposes, not all of which are well expressed in terms of buying and selling in markets.

It is true that intellectual constructs and tools can be used to understand and illuminate a variety of different kinds of interaction. The concepts of economics, for example, which are used to understand exchanges on markets, can also be used to understand political science and even religion. Political choices may have calculable costs and benefits, just like business choices; political parties or mafia cartels may be compared to firms in the market. But it does not follow from such applications of concepts that the two choice situations are morally or legally equivalent. A criminal who offers you a choice between keeping your money and keeping your life is not relevantly like an entrepreneur who offers you a choice between keeping your money and using it to buy a commodity, for the simple reason that the criminal forces you to choose between two things to both of which you have a moral and legal entitlement, whereas the entrepreneur offers you a choice between two things, to one of which he has an entitlement and to one of which you have an entitlement. In both cases you make a choice and act purposively, but in the former case the criminal has forced you to choose, whereas in the latter case the entrepreneur has offered you a choice; the former lessens your entitlements and the latter offers to increase them, by offering you something you don’t have but may value more for something you do have but may value less. Not all human relationships are reducible to the same terms as markets; at the very least, those that involve involuntary “exchanges” are radically different, because they represent losses of opportunity and value, rather than opportunities to gain value.

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