Piketty Notes and Quotes, 4: The Nub of the Problem

It would be a mistake to attempt, as many bloggers, pundits, and commentators have done, to summarize such a vast collation of history and data as we find in Piketty’s Capital into a single simple argument, which can then be discredited by one fell swoop of counter-evidence.  It is a sprawling work composed of dozens of theses and sub-theses, supported by many different sources and types of data.  However, the basic gist is fairly straightforward and intuitive, and worth grasping for those who don’t have time to read the whole book.  It is best stated in his own words:

“When the rate of return on capital significantly exceeds the growth rate of the economy (as it did through much of history until the nineteenth century and is likely to be the case again in the twenty-first century), then it logically follows that inherited wealth grows faster than output and income.  People with inherited wealth need save only a portion of their income from capital to see that capital grow more quickly than the economy as a whole.  Under such conditions, it is almost inevitable that inherited wealth will dominate wealth amassed from a lifetime’s labor by a wide margin, and the concentration of capital will attain extremely high levels—levels potentially incompatible with meritocratic values and principles of social justice fundamental to modern democratic societies.

What is more, this basic force for divergence can be reinforced by other mechanisms.  For instance, the savings rate may increase sharply with wealth.  Or, even more important, the average effective rate of return on capital may be higher when the individual’s initial capital endowment is higher (as appears to be increasingly common).  The fact that the return on capital is unpredictable and arbitrary, so that wealth can be enhanced in a variety of ways, also poses a challenge to the meritocratic model. . . .

To sum up what has been said thus far: the process by which wealth is accumulated and distributed contains powerful forces pushing toward divergence, or at any rate toward an extremely high level of inequality.  Forces of convergence also exist, and in certain countries at certain times, these may prevail, but the forces of divergence can at any point regain the upper hand, as seems to be happening now, at the beginning of the twenty-first century.  The likely decrease in the rate of growth of both the population and the economy in coming decades makes this trend all the more worrisome.

My conclusions are less apocalyptic than those implied by Marx’s principle of infinite accumulation and perpetual divergence (since Marx’s theory implicitly relies on a strict assumption of zero productivity growth over the long run).  In the model I propose, divergence is not perpetual and is only one of several possible future directions for the distribution of wealth.  But the possibilities are not heartening.  Specifically, it is important to note that the fundamental r > g [return on capital is greater than the economic growth rate] inequality, the main force of divergence in my theory, has nothing to do with any market imperfection.  Quite the contrary: the more perfect the capital market (in the economists’ sense), the more likely is to be greater than g.  It is possible to imagine public institutions and policies that would counter the effects of this implacable logic: for instance, a progressive global tax on capital.  But establishing such institutions and policies would require a considerable degree of international coordination.  It is unfortunately likely that actual responses to the problem—including various nationalist responses—will in practice be far more modest and less effective.

. . .

In the late nineteenth century, conservative French economists such as Paul Leroy-Beaulieu often used this argument to explain why republican France, a nation of ‘small property owners’ made egalitarian by the Revolution, had no need of a progressive or confiscatory income tax or estate tax, in contrast to aristocratic and monarchical Britain.  The data show, however, that the concentration of wealth was as large at that time in France as in Britain, which clearly demonstrates that equality of rights in the marketplace cannot ensure equality of rights tout court. [italics mine]  Here again, the French experience is quite relevant to today’s world, where many commentators continue to believe, as Leroy-Beaulieu did a little more than a century ago, that ever more fully guaranteed property rights, ever freer markets, and ever ‘purer and more perfect’ competition are enough to ensure a just, prosperous, and harmonious society.  Unfortunately, the task is more complex.” (pp. 26-27, 30)


Tetzel on Craigslist: Commodification and the Demise of the Commons

In his incisive and thought-provoking new book, What Money Can’t Buy: The Moral Limits of Markets, renowned political philosopher Michael Sandel invites us to step back and take stock of the results of the rapid expansion of market logic into every area of life that the last generation has witnessed.  Economics has transformed itself from a discipline concerned with the production, exchange, and allocation of material goods and services to a master-science claiming to describe the logic of all human social relations in terms of cost-benefit analyses.  In tandem with this theoretical shift has come the increasing subjection of areas of life once governed by non-market norms to the logic of free exchange driven by supply and demand.  Many today, including (perhaps especially?) many Christians may have difficulty in seeing what is wrong with this trajectory—after all, doesn’t this represent the triumph of free, voluntary social relations over against coercive, top-down ones (for a critique of this gross oversimplification, see here)? 

 Inasmuch as the logic of the market, though, is amoral and nonjudgmental—it doesn’t matter what you want and why as long as you’re willing to pay for it—Christians should be deeply concerned, and should heed Sandel’s call to bring morality back into the picture, asking about the moral consequences of subjecting more and more of our lives to the logic of exchange (especially as Sandel himself does not provide a theological basis for this moral concern).  Accordingly, I want to reflect here on the first set of phenomena he examines, “Jumping the Queue,” from a more explicitly theological standpoint.

 

In his first chapter, Sandel surveys at a variety of cases, around the world, in which the “ethic of the queue”—first come, first served—has been replaced by the “ethic of the market.”  The examples range from the relatively innocuous (the option to pay extra for a “fast track” pass at an amusement park) to the somewhat more troubling (the option for solo drivers to pay extra to use the carpool fast lane in crowded cities) to the downright dirty (lobbyists paying homeless people to stand in line for them overnight so they can be assured a place in Congressional hearings).  

From the standpoint of the Christian ethical tradition, these developments might be described as a “demise of the commons.”  As I have discussed at length on this blog before, the Christian ethical tradition long insisted on the priority of common use over private property.  That didn’t mean that private property was unjustified, but it meant that it did have to be justified.  It wasn’t a self-evident, self-justifying fixture of the natural order.  For the Christian, God has created the world for the use of all his creatures, and above all, for the use of mankind.  Since all men are created equal, the world’s resources are intended to provide equally for the needs of all.  As an institution, then, private property is to be justified on the basis that it can most effectively facilitate the use of the earth to meet the needs of all.  This being the case, any given holder of private property possesses his title on the moral condition that it be used not for his mere private benefit, but for the community at large.  The ongoing commitment to common use may be demonstrated in a private property economy in at least three ways: 1) by the use of private property in such a way that its fruits accrue to the benefits of others—preeminently employees and customers; that is to say, if I am the proud possessor of an apple orchard, I can ensure that the orchard serves common use by paying the apple-pickers a good wage and by selling the produce on to customers at a just price—but not, say, by intentionally allowing half the apples to rot so as to drive up the price of the others and make a better profit; 2) by the redistribution of the profits of private property to society at large, or to the needy—this can occur through taxation, or through voluntary giving to charity, or both; 3) by the preservation of certain areas—whether physical spaces, particular resources or services, or kinds of social relations—from private appropriation, maintaining them as common resources which everyone can use within the constraints of certain rules of fairness (rivers and oceans, for instance, are generally treated this way).  

 A good economy will combine all three.  The second, I would suggest, is the worst, because it does not necessarily challenge the logic of private right—you can do whatever you want with your property, and make as much money as you want, just share a little of your plunder with the rest of us when you’re done, will you?  When voluntary charity is the form of redistribution, the selfish logic can in fact be reinforced, as the giver thinks of himself as a magnanimous benefactor sharing from what is rightfully his alone, rather than someone recognizing the claims of others on the fruits of the earth.  Nonetheless, society today favors the second most of all, whether in its coercive forms (as the left prefers) or its voluntary (as the right prefers), because it is the least intrusive on the logic of private possession.  The third used to be recognized in many ways and institutions throughout society, but these are being steadily eroded.  Sandel’s examples draw particular attention to this phenomenon, particularly notable in the practice of ticket scalping for free public events or services (in China, scalpers wait in line for $2 doctor-appointment tickets, and then sell them to the desperately ill for much higher prices; in New York, free Shakespeare in the Park community theatre tickets are resold on Craigslist for $125).  Deeming such public services inefficient, we increasingly prefer to withdraw them from the sphere of common use and auction them off to the highest bidder.  Perhaps this tendency is an inevitable result of the Lockean logic within which we have long justified private property.  For Locke, private property exists not as a means to common use, but as an extension of our right of self-possession.  We have an inalienable right to ourselves and our own actions; therefore, why not to those things with which we have “mixed” ourselves in the form of our labor?  A free community theatre presents itself as the possession of the whole public, which we are free to come and share in, but which we cannot simply appropriate and make it our own.  But if Locke is right, why not?  My money, as the product of my labor, is the extension of myself, and there is no reason to appropriate to my own exclusive use whatever my money can buy, whether it be the fast lane or a ticket to a papal Mass ($200 on Craigslist for Benedict XVI’s first visit to the States).

 

In embracing this logic, and asking, “Where’s the harm?” Protestants are forgetting their theological heritage.  After all, more than anything else, the Reformation was a rejection of the commodification of religion, the subjection of God’s grace to the logic of exchange and private acquisition.  Late medieval Catholicism, after all, did a booming trade in souls and spiritual benefits.  Indeed, the phenomena of “jumping the queue” which Sandel documents has its precise complement in the indulgence trade which sprung up in the late Middle Ages, and the many other ways by which those willing to pay could speed their souls to heaven—almsgiving, funding private masses, even hiring surrogates to fight in a crusade.  The rich were able to buy a fast-pass to heaven, to “jump the queue” of purgatory.  Why does this trouble us?  Well, the issue of inequality, as I have just hinted, is obviously part of the problem, and Luther’s war against indulgences was motivated in large part by his anger at the oppression of the poor it entailed.  The rich nobleman, with a modest outlay, could pave his golden highway to heaven without great difficulty, while the mass of poor peasants felt shut out of the kingdom, scrimping and saving their meager resources to purchase indulgences.  Sandel, of course, draws attention to the same problem of inequality in the phenomena he looks at.  The queue is the great equalizer.  The richest must wait as long as the poorest to go through security at the airport.  The poorest has just as much opportunity to see Shakespeare in the Park as the richest.  Where the ethic of the queue dominates, income inequality is not a major issue, because the poor man’s lower income does not bar him from access.  He has rights of common use.  But the more the ethic of the queue is replaced with the ethic of the market, the greater the benefits of the rich.

To apply this logic to salvation, as the late medieval Church did, was to utterly corrupt the grace of God.  The Christian faith is not a private possession to be bought and sold.  God is not a marketable commodity.  In response, Luther preached a spiritual economy of free grace, of a great common spiritual possession that we were invited to enter into and share in.  Just as the physical world was created for the common use of mankind, not for the purpose of being parceled off to the highest bidder, so our heavenly inheritance was a shared possession to which we were given a birthright by the grace of Jesus Christ, not a store of merit to be purchased by those who could afford it.  

But as this picture shows, the problem is not just inequality.  Conservatives, indeed, would reject Sandel’s concern about inequality and would defend the onward march of commodification on the basis that we live in a meritocracy, that the rich are rich because they’ve earned it, and the poor are poor because they haven’t.  Everyone has, in principle, an equal chance to get those Shakespeare in the Park tickets even if they cost $125, because everyone has an equal chance to make that money, if they’re just willing to sweat and toil enough for their slice of the pie.  Let’s ignore for now how little this picture resembles reality.  The problem is, as Sandel argues, that more than just inequality is at stake.  Even if everyone had equal opportunity to buy and sell children, for example, doesn’t mean they should.  Some things simply shouldn’t be treated as commodities, because this flies in the face of their proper nature, corrupting the way we view them.  Children are an obvious and extreme example, but perhaps, he suggests, the same concern applies even to community theatre or papal masses.  Some things lose their real value when we try to put an exchange value on them.

Again, the case of Luther’s protest is instructive.  Inequality was not the only problem with the late medieval religious economy.  After all, you didn’t have to be rich.  It was handy to be rich, because then you could get the benefits without working; but if you were poor, you could still get in the fast lane to heaven too—if you worked hard enough: fasting, praying, pilgrimage, deeds of charity, rituals, etc.  Ultimately, the Church could counter, it was a meritocracy, not an aristocracy.  But that was precisely the problem.  Luther understood that this corrupted the whole nature of what was on offer.  The favor of God wasn’t something you worked for, but something you were freely given.  It was something that belonged to you by virtue of being in the family of God—in Christ, we are sons and fellow-heirs, not hired laborers trying to earn our keep.  

 

Perhaps by thinking through the theological implications of how the logic of exchange corrupts our relationship with God, privatizing us into self-interested agents, we may gain insight into how the logic of exchange, when extended beyond its proper boundaries can tend to corrupt our human relationships, substituting the agenda of acquisition for the agenda of participation.  

 

Addendum: An additional thought—lurking behind all this is the question of plenitude vs. scarcity.  That, of course, is the major disanalogy between what Sandel is talking about and what Luther was dealing with.  God’s grace really is infinite, which is why it’s so wrong to treat it as a finite commodity to be apportioned out, whereas Chinese medical appointment tickets are genuinely finite.  Not only do you not have to pay for Jesus, you don’t have to stand in line for him either.  There is no limit on how many people can participate in the common good that is God’ s grace, but there is a limit to how many people can participate in the common good that is Shakespeare in the Park. It is the scarcity of something that convinces economists that it should be apportioned by market mechanisms.  Of course, I think that it is precisely our sense that certain things should not be scarce, should be treated as unlimited goods, that in many cases informs our sense that it is wrong to pay for them.  Is this just self-delusion, trying to pretend that things aren’t scarce when they are?  Or ought we to cultivate such an attitude?  To what extent is the perception of scarcity self-fulfilling?  All such questions I shall merely raise for now, not attempt to answer.


Economies of Deception

Two books I have recently read, Treasure Islandsand Merchants of Doubt, have each highlighted, in their different ways, how deeply rooted deception is in our current economic order.  Banks hide behind many layers of secrecy, shuttling funds around shady offshore jurisdictions, in order to get by with transactions that would never pass public scrutiny, and to hide profits from taxation.  Manufacturers have turned to the business of manufacturing doubt about the environmental impacts of their activity, systematically engaging in smear campaigns against scientists and whistle-blowers who reveal these impacts and costs, and funding “studies” to convince that everything from CO2 to acid rain to DDT to cigarettes are clean, safe, and sustainable.  

A slew of recent high-profile scandals have illustrated the same tendency.  The world’s largest company by market cap, Apple, Inc., was sued by the US Department of Justice for secretly colluding to fix prices on e-books.  More recently, damning allegations have come to light that the world’s largest company by revenue, Wal-mart, engaged in systematic bribery to gain a major foothold in Mexico, and, most seriously, that the bribery was then carefully covered up by senior Wal-mart executives.  A couple months further back, US meat-lovers were scandalized to learn that supermarkets and fast-food chains had been selling them beef padded with ammonia-sprayed “pink slime,” prompting a massive public backlash and the virtual shutdown of the pink slime industry, may it rest in peace.

 

Despite their differences, all of these episodes reveal a troubling problem in our economic order—the truth doesn’t sell.  The truth about tobacco doesn’t sell cigarettes, the truth about beef doesn’t sell burgers, the truth about e-book prices doesn’t make nearly as much profit as an artificially jacked-up price, the truth about Wal-mart’s corporate practices isn’t gong to endear them to consumers.  

This problem points to a deeply-rooted contradiction in the free market model—its hostility to the free flow of information.  For Adam Smith and other free market theorists, free access to information was a key pillar of a successful free market.  If a given exchange was to be genuinely free, and thus maximize the total benefit for buyer and seller, then buyers and sellers had to have roughly equal knowledge of the relevant information.  If I sell you a rhinestone necklace while deceiving you into thinking that it is in fact diamond, then we wouldn’t call this a properly free exchange, even if you eagerly bought it at the offered price.  The resulting transaction would not have taken place at the true equilibrium price, the point at which markets are maximally efficient.   

But of course, while maximally efficient for the market as a whole, the equilibrium price is not where either buyers or sellers would prefer to transact, since it limits the gain that either can make.  A buyer would prefer to take advantage of a going-out-of-business sale, in which a distressed merchant has to sell goods at well below the normal equilibrium price in order to get rid of them quickly.  A seller would prefer to take advantage of a naive first-time buyer, who has no idea how much something normally costs, so he can charge far more than it’s worth—hence the rip-off merchants that like to cluster around entry points for foreign tourists.  As this latter illustration shows, limited information can provide tremendous opportunities to avoid the equilibrium price and maximize gain.  

Generally, it is the seller who is in much the stronger position to make use of this information gap, since the seller usually knows a great deal more about the actual value of the goods and where they’ve come from than the buyer.  The seller may know that a product has cost him $10 to acquire, and he will have to sell it for $12 in order to turn a profit; but if he can convince the buyer that in fact the market price is $20 (say, by normally selling it at that price, and occasionally having a 50% OFF CLEARANCE SALE!), then so much the better.  This kind of disequilibrium is of course ubiquitous, but normally it doesn’t bother us that much, because it is kept in check by competition.  Assuming plenty of competitors in the marketplace, and assuming they aren’t colluding with one another (which, as the Apple case shows, is not always a safe assumption), we can count on the selling price as a whole to gravitate toward equilibrium, especially if we are willing to be shrewd shoppers and only buy things when they’re on sale, recognizing that the sale price is likely to be closer to the real price.

But rather harder to exorcise is the suppression of unsavory information about a product—if it comes from an unethical source (e.g., blood diamonds or Nikes), or contains harmful ingredients (e.g., Coke, a Big Mac, or tobacco), or else is just useless for its supposed purpose (e.g., a high proportion of patented medications and hygiene products, for which dirt-cheap natural substitutes are often far more effective).  Any of this information might cause the consumer to pay far less for the product, or reject it altogether (which would, of course, force the price down for those still willing to buy).  While we might be able to rely on McDonalds to sooner or later make it clear to us that Burger King is systematically overstating the cost of beef, by underselling them if they price it too high, it is in neither McDonalds’s nor Burger King’s interest to be forthcoming with us about the unsavory backstory of that beef, just as, competitors though they may have been, everyone in the tobacco industry could agree to work together in manufacturing doubt and disinformation about the dangers of smoking.  Collusion in the suppression of information is the order of the day.  

 

What all this suggests, of course, is the dependence of any kind of free market on a robust moral order, the dependence of The Wealth of Nations on The Moral Sentiments.  When the pursuit of profit becomes a self-justifying end, truth becomes a readily dispensable commodity, because truth will not maximize profit.  And as truth is exchanged for profit, a genuinely free market is exchanged for a war of all against all, in which consumers and producers are locked in an endless battle of trying to deceive and outwit the other.  If a free market can work, it can only work within a vigorous shared commitment to truth and honesty that runs deeper than any desire for gain, an integrity that “swears to its own hurt.”  Whether such a shared commitment can be counted on in any society, much less in our current culture that is at war with the very idea of truth, is an open question, and one that needs to be faced more honestly by the proponents of free market orthodoxy.


Technofideism

An intriguing passage from the fascinating (and deeply troubling) book Merchants of Doubt, about which much more soon to come:

“Cornucopians hold to a blind faith in technology that isn’t borne out by the historical evidence.  We call it ‘technofideism.’

Why do they hold this belief when history shows it to be untrue? Again we turn to Milton Friedman’s Capitalism and Freedom, where he claimed that “the great advances of civilization, in industry or agriculture, have never come from centralized government.” To historians of technology, this would be laughable had it not been written (five years after Sputnik) by one of the most influential economists of the second half of the twentieth century. 

The most important technology of the industrial age was the ability to produce parts that were perfectly identical and interchangeable. Blacksmiths and carpenters couldn’t do it; in fact, humans can’t do it routinely in any profession. Only machines can. It was the U.S. Army’s Ordnance Department that developed this ability to have machines make parts for other machines, spending nearly fifty years on this effort—an inconceivable period of research for a private corporation in the nineteenth century. Army Ordnance wanted guns that could be repaired easily on or near a battlefield by switching out the parts. Once the basic technology to do this—machine tools, as we know them today—was invented, it spread rapidly through the American economy. Despite efforts to prevent it, it soon spread to Europe and Japan, as well. Markets spread the technology of machine tools throughout the world, but markets did not create it. Centralized government, in the form of the U.S. Army, was the inventor of the modern machine age.

Machine tools are not the exception that proves the rule; there are many other cases of government-financed technology that were commercialized and redounded to the benefit of society. Even while Friedman was writing his soon-to-be-famous book, digital computers were beginning to find uses beyond the U.S. government’s weapons systems, for which they were originally developed. Private enterprise transformed that technology into something that could be used and afforded by the masses, but the U.S. government made it possible in the first place. The U.S. government also played a major role in the development of Silicon Valley. In recent years, something we now all depend on—the Internet, originally ARPANET—was developed as a complex collaboration of universities, government agencies, and industry, funded largely by the Department of Defense’s Advanced Research Projects Agency. It was expanded and developed into the Internet by the government support provided by the High Performance Computing and Communication Act of 1991, promoted by then-senator Al Gore.

In other cases, new technologies were invented by individual or corporate entrepreneurs, but it was government action or support that transformed them into commercially viable technologies; airplanes and transistors come to mind. (Transistors were explicitly promoted by the U.S. government when they realized that Minutemen missiles needed onboard rather than remote controls, and vacuum tubes would not suffice.) Still other technologies were invented by individuals but were spread through government policy. Electricity was extended beyond the major cities by a federal loan-guarantee program during the Great Depression. The U.S. interstate highway system, which arguably created postwar America as we know it, was the brainchild of President Dwight Eisenhower, who recognized the role it could play both in the U.S. economy and in national defense; it became the model for similar highway systems around the globe. And nuclear power, which may help us out of the global warming conundrum, was a by-product of the technology that launched the Cold War: the atomic bomb. The relationship between technology, innovation, and economic and political systems is varied and complex. It cannot be reduced to a simple article of faith about the virtues of a free market.” 


If Corporations are People…

After a spell of travel-induced inactivity, I return with some more half-baked musings loosely inspired by Nicholas Shaxson’s Treasure Islands.

If corporations are people, then shouldn’t they pay the same taxes as everyone else?  Why should corporate tax rates generally be lower than personal income tax (the US is an exception here, though exemptions and loopholes mean that many companies pay far less than the 35% rate)?  If corporations are people, then why can they relocate from one jurisdiction with relative ease, without having to go through immigration and naturalization?  Why, for that matter, can they split themselves into pieces and be in several countries at once?  I certainly can’t do that.  If corporations are people, then why can they live forever?  And why shouldn’t they be beholden to those who brought them into being (viz., the government—”The state is the only institution in the world that can bring a corporation to life.  It alone grants corporations their essential rights, such as legal personhood and limited liability….Without the state, the corporation is nothing.  Literally nothing.”—Joel Bakan, The Corporation)?  My parents had enormous authority over me through my first eighteen years, but corporations, we are told, should be free from regulation by the legal regime that brought them into being.  

If we’re going to push the concept of corporate personhood to insist on “human rights” like “free speech” for corporations, then perhaps we should be consistent.  As it is, corporations are not simply persons, but highly privileged persons provided by law with opportunities and powers unavailable to most people.  

 

On a related note—

If competition is the essence of a free market, then why should the market be exempt from the constraints we apply to other forms of competition?  If I wanted to participate in the Olympics, then I would have to go through a rigorous selection procedure to ensure that I was a legitimate participant and would have to meet relevant national and international codes and standards merely for the opportunity to compete.  Once I was in, I would be subject to general rules established to minimize opportunities for cheating, bribery, etc., and to extensive tests to prove that I was not using performance-enhancing drugs.  To comply with regulations against such drugs, I would have to avoid even a number of perfectly legitimate drugs that contained restricted substances (as Andreaa Rudican so tragically learned at the 2000 Olympics).  In addition, my particular sport would be governed by a lengthy list of rules that established the manner in which I was to compete and restricted me from taking any unfair shortcuts or conduct that would unfairly sabotage my rivals.  These rules would be enforced by referees who would closely oversee the whole event and would be authorized to nullify my results or eject me from the competition if necessary.   

Of course, no doubt we could complain in some cases about bureaucratic overkill, obsessive and demeaning drug-testing, and hyperactive refereeing.  But surely we would all admit that without extensive rules setting both the terms of participation, the nature of the game, and the legitimate means that could be employed in competition, most of the organized sports that we love would be impossible.  If sprinters could dope as much as possible, they might be incredibly fast, but no one would bother to watch—the races would no longer be athletic competitions, so much as medical experiments in responsiveness to drugs.  If football players could do whatever they wanted to get the ball to the end zone, then football would degenerate into rugby.  Ok, just kidding—even rugby has rules, and plenty of them.  Football would degenerate into a brawl.  

To be sure, in an amateur pick-up game, referees will probably be unnecessary, and even rules can be somewhat loose and flexible; general goodwill and commitment to gentlemanliness may ensure that competitiveness does not get out of hand.  But the higher the level and the higher the stakes, the more precise rules are necessary—exactly when does the race start? exactly what comprises the strike zone? when is a foul a flagrant foul?—and the less one can rely on the participants to self-regulate.  Indeed, the employment of outside referees should not be seen as an insult to the integrity of the players, but as doing them a favor—with an outsider charged with making sure the rules are followed, the players can focus on playing the game, rather than always watching the other players out of the corner of their eye for violations.  They can rest assured that, even if they get carried away by emotions in the heat of competition, there’s a reasonably objective third party who will still judge clearly.

 

Free marketeers love to invoke the idea of competition.  Competition is what makes capitalism work.  But then they are prone to turn around and deny that this competition needs the kind of rules and refereeing that any other competition needs.  And yet, if anything, in business, the stakes are far higher than in football or gymnastics.  A trophy or a gold medal might be exciting, but in the end, how much depends on it?  But businesses are engaged in creating and destroying people’s livelihoods; indeed, in developing countries, business competition can be a matter of life and death for some people.  And yet, we are assured, even if football players shouldn’t be allowed to regulate themselves, corporations should.  Again, if markets are all about competition, then let’s get real and start treating them like one.