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The free market exists because of something no one likes to be reminded of: scarcity.

As Hayek showed, government control over the means to human flourishing leads inevitably to government control over the ends of human flourishing.

Nathan W. Schlueter

Under steady pressure from post-liberal and populist voices, Republican party leadership seems to have taken a surprising turn against the free market and towards interventionist policies—protectionism, industrial policy, regulations, welfare, and labor unions—more traditionally associated with the Left than the Right.

The truth is that the free market is not easy to defend. That is not to say it is indefensible. To the contrary, there are many strong arguments in favor of it, including the scope it gives to human freedom and creativity; the innovation and wealth it generates; and the incompetence, injustice, and dangers of undue government interference and control.

But most people find it difficult to understand and appreciate these arguments when faced with the immediate advantages of government intervention. The problem is not logical, it is psychological. Instead of an explicit rejection of the free market, we have witnessed the steady growth of well-intentioned anti-market attitudes and policies, which cause real but hidden harm while nudging us along what F. A. Hayek famously called The Road to Serfdom.

We can see why the defense of the free market is so difficult and yet so important by juxtaposing it with other domains of human action. The common good of a healthy political association is not simple. It includes at least three spheres that exist in a dynamic and uneasy tension with one another: civil society, the free market, and government.

This seemingly clear division can be very misleading, since all of these spheres, and their corresponding activities and habits, overlap and intersect in ways that are difficult to distinguish. Each sphere has its own distinctive purpose, activity, and “logic” or mode of practical reasoning. And one consequence of this complex reality is that human beings must learn, and learn to apply, different standards of evaluation and behavior to different domains in their lives.

Put most simply, civil society is the sphere where persons pursue the “intrinsic” goods—goods we have reason to want for their own sake—that constitute happiness and flourishing. Civil society is the space of genuine leisure; not merely entertainment, but worship, marriage, family, friendship, and culture. It operates by a “logic” of generosity, commitment, caregiving, and charity.

The free market is the sphere of “instrumental goods”—goods such as money that we only have reason to pursue for the sake of other goods—where persons acquire the means for their flourishing by exchanging their time, labor, resources, and other instrumental goods. It operates by a “logic” of negotiation, calculation, and thrift.

Finally, government is the sphere that provides the overall framework within which the other two spheres can operate well. Government also helps prevent encroachments by the other spheres and provides goods that are difficult or impossible for the other spheres to provide. Government operates by a “logic” of common deliberation and collective action on behalf of the common good, backed by coercive power. 

Each of these spheres provides something distinctive that cannot be provided by the others. Left alone and in isolation from the others, each is prone to expand beyond its due limits, harming people and the common good. The challenge is to make all three work together and correct one another in the way that best promotes human flourishing. The constant ideological temptation is to reduce them to one. Totalitarian ideologies such as communism and fascism attempt to absorb civil society and the market into government. Libertarianism tends to reduce government and civil society to the logic of the market. More subtly, theocracy seeks to subordinate both government and the market to a unified vision of civil society determined by religious authority and doctrine. 

Of these three spheres, the free market is the most difficult to defend. And that difficulty is not simply the result of market excesses or externalities, like manipulative advertising, a surplus of cheap, ugly products, or pollution. The difficulty is intrinsic to even a healthy market. The reasons have to do with scarcity, utility, impersonality, self-interest, and complexity. These words typically cause a negative emotional reaction. Yet each word expresses a reality we rely upon every day, and which we must humbly acknowledge and accept in order to flourish.

First, the free market exists because of something no one likes to be reminded of: Scarcity. Human beings are very needy. Nature does not spontaneously provide food, clothing, and shelter, much less the time or instruments of leisure like books and musical instruments.

Second, the primary advantage of the free market is its usefulness in helping overcome scarcity. We all like and need useful things, but as Aristotle repeatedly observes in his Nicomachean Ethics, the useful is not beautiful. Beauty consists in a gratuitous overflow of being that attracts our wonder and admiration, whereas the useful is merely necessary.

True, the market unleashes astonishing creativity and energy. Ayn Rand is a mediocre novelist, but her romantic entrepreneurs remind us of the kinds of human greatness that can find a place in the free market, and of the gratitude we should have for their efforts. Still, in the end, for most people, the market is about “getting and spending,” in which all too often “we lay waste our powers.” 

Third, the logic of the free market is impersonal. If the first two elements did not elicit immediate negative reactions, this one is sure to do so.

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