Sunday, April 8, 2012

The free market is not the free market

What I find most difficult about teaching utilitarianism to students is that they conflate it with a cost-benefit analysis. It is an understandable mistake; in each, one aggregates many different kinds of effects, puts them into one unit, and measures the total outcome. Students have trouble understanding happiness as a unit of measure. Dollars seem so much more real. I like to discuss with them how some kinds of effects are put in dollar terms: for example, the value of people's enjoyment of a neighborhood park. Either we ignore that benefit, or we come up with somewhat contrived measures, such as the increase in property values around the park as a reflection of how much money it is worth. Isn't happiness generally what is being measured?

The other notion that seems clear in their minds before the discussion begins is that CBA entails certain outcomes. Most students do not believe that parks, regulations, or investment would survive a CBA. They take CBA to be a kind of corporate logic: cut wages, cut investment, do anything to boost sales, and so on. Given the political and economic environment today, this is a reasonable association to have, that a CBA is about the short term, narrow interests, and the bottom line. But students need to be coaxed into thinking about whether a CBA can focused on the long term and inclusive of broad effects. And then they can also be guided into a discussion about whether a metric other than dollars can be used before it is worth it to introduce utilitarianism. As with most ideas, I find that it is better to confront preconceptions first and introduce the new idea after we have aired out prior notions. The teacher has to dislodge the profit-seeking logic of corporations before moving onto the "hedonic calculus" of governments.

In the same category of ideas that are difficult for students to understand separately from current context is the free market. Ask a student to describe the free market; you will get a description of the current economic environment: corporations that dominate the economic landscape, and to a lesser extent, the political landscape; globalization; and perhaps a mention of consumer choice or absent consumer protections. Here is a good question to start: What role does the government have in creating, nurturing, and protecting corporations? I believe most students think about the free market as an absence of government regulation but assume that corporations are "natural" and will exist and function just fine without any government intervention. So, I try to pick at this notion and ask them how they think corporations would do if:

1) government stopped enforcing contracts
2) government no longer recognized corporate charters, i.e., corporations no longer provided limited liability to managers and shareholders
3) government stopped enforcing patents and trademarks
4) government stopped providing basic social services, like roads, education, investment in basic research

My goal is not to make an ideological point with them; I am not trying to argue for corporations as good or bad. I am simply trying to get them to recognize that corporations are not natural; they are legal, thus government, creations. In the absence of 1-4, it seems quite likely to imagine that a truly free market -- a truly laissez faire government policy -- could only exist on a much smaller scale, mostly small, family-owned businesses. As a factual matter, the U.S. economy is not a truly free market, not because of the big individual welfare programs (education, health care, unemployment, retirement, food stamps, and public housing), but because of the legal and other policies designed to support corporations.

Do students ever think about this in a U.S. history class? It seems vitally important to understand, but I doubt high school students think about these issues unless they take a civics class in high school (a dwindling number I am sure) or debate.

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