“Government isn’t the solution to our problems. Government is the problem.”
— Ronald Reagan,
January 20, 1985,
First Inaugural Address
It is tempting to parody Ronald Reagan in light of the events of the past 12 months (and longer) and say: The market isn’t the solution to our problems. It is the problem.” Tempting, but just as illogical and fallacious as Regan’s statement was and remains. Government isn’t the problem because it isn’t the solution to our problems. Indeed, few critical thinkers would ever have claimed that government was the solution to our problems. Government policy and government action to enforce those policies can contribute to the solution of our problems. Government policy may be a necessary part of the solution to our problems, but it is not — by itself — sufficient to solve those problems.
It’s the same with markets. The market is the context, the setting, the ecosystem within which our problems emerge and within which our problems must be solved. If there is any lesson that should be taken from the failure of the Soviet experiment (1919 to 1981) it is that it isn’t possible to simply abolish the market. This is the (sole) truth that should be taken from so-called public choice theory. But the “market” does not exist as some pure, pristine Platonic Form that is corrupted by fallible and flawed human actors. The market is itself created — at least in part and, in some cases, in substantial part — by government policy. With no offence intended to proponents of deregulation, the market doesn’t just emerge from the unconstrained actions of market participants. Or rather, the market that would emerge from the unconstrained actions of market participants would resemble Thomas Hobbes’ description of the State of Nature: “a War of every man against every man” in which life is “solitary, poore, nasty, brutish, and short”.