The tragedy of The Free Market
In 1968 Garrett Hardin published his paper "The Tragedy of the Commons" in Science. This theory has since been accepted as a guideline for administering commons around the world. And few have so far been able to refute his logic or prove this mechanism non-excistent. This is the reason why management of biological resources, like stocks of fish or wildlife, are under detailed regulations. This is done to prevent the collapse of these resources and "... ruin to all". Here it is claimed that the result of free acess to harvesting resources leeds to disaster.
First, let us look at what a common is. According to Wikipedia it is "... a parcel of land, usually near the centre of towns and villages, which is thought to be owned 'in common' by all the members of the community." This leads to the assumption that there is no regulation in the individual access to the recources of the common from those members of the community. This is the reason why goverments has to "take possession" of this land and regulate the harvesting of resources. The fact that "... this definition is actually a widely held misconception", to quote the Wikipedia, has no bearing on the conclusion in this case, since it is this misconception that is the basis for govermental intervention and of human rationalization.
One could look upon a market as a form of common. Every market is, on the most fundamental level, made up of two parts: money and people. If one of these are missing, you do not have a market. Then the next question is: what is the recource basis of a market; where do the people get their money? The evident answer is; from work in some kind of business. So a market is thereby a product of those who live of the market. The businesses both contribute to the market as well as harvest from it. To create a stable market the in- and outflow from the businesses must be balanced.
Up to our time the markets of this planet has been devided by space, politics and culture. The different markets traded between eachother and thereby could exploit their own particular strength. The reason for this was that what a market exported was worth less home than it was in the target market. You harvested the recources within a market/country, which in this connection were of no value, exported them to a place they were valuable and thereby imported money to found your own home market. This interplay between many different markets has been the true source of wealth.
But now things have changed. The markets are more and more integrating, becoming one global, free market, "The Free Market". Let us then take the words of Garret Hardin from 1968 and rewrite them for 2005 with this new understanding of the concept of markets as commons in mind. This is maybe how it would sound:
"The tragedy of the free markets develops in this way. Picture a market open to all businessmen. It is to be expected that each businessman will try to earn as much money as possible in the markets. Such an arrangement may work reasonably satisfactory for centuries because scarcity of trading goods, limiting laws, and import/eksport duty keep the number of businessmen and customers in balance in each local market. Finally, however, comes the day of reckoning, that is, the day when the long-desired goal of a global market becomes a reality. At this point, the inherent logic of the market remorselessly generates tragedy.
As a rational being, each businessman seeks to maximize his gain. Explicitly or implicitly, more or less consciously, he asks, "What is the utility to me of firing one more worker from my business?" This utility has one negative and one positive component.
1. The positive component is a function of the reduction of one worker. The extra workload has to be carried by his former co-workers. This is called rationalization. But, since the businessman receives all the proceeds from the firing of the additional worker, the positive utility is nearly + 1.
2. The negative component is a function of the additional reduction of the market created by one less income. Since, however, the effects of market reduction are shared by all the businessmen, the negative utility for any particular decisionmaking businessman is only a fraction of - 1. And the larger the market is, the smaller this fraction will be.
Adding together the component partial utilities, the rational businessman concludes that the only sensible course for him to pursue is to fire another worker from his business. And another.... But this is the conclusion reached by each and every rational businessman sharing a market. Therein is the tragedy. Each man is locked into a system that compels him to decrease his working force without limit -- in a world that is limited.
Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the markets. Freedom in a global market brings ruin to all."
The same kind of rationalization can be used when it comes to reducing the wages of the workers, the mechanism within "The tragedy of the commons" will produce the same end result.
And this mechanism has been, and are, at work in the global market today. The globalists are steadily working towards one global, free market. And in doing this they are destroying the wery thing that keeps them, and us, economically alive. To illustrate this point, let me quote from The Baltimore Chronicle:
"By substituting foreign for American workers, US corporations are destroying their American markets. As American jobs in the higher paying manufacturing and professional services are given to Asians, and as American school teachers and nurses lose their occupations to foreigners imported under work visa programs, American purchasing power dries up, especially once all the home equity is spent, credit cards are maxed out and the dollar loses value to the Asian currencies." This is "The tragedy of The Free Market" at work.
But there are more to learn from this mechanism of tragedy. Both the free harvesting of biological recources and the harvesting of a free market is destructive in nature. The herdsman and the businessman are both, in principle, thinking the same way and thereby acting subsequently. It is the way they think wich lead to the way they act.
The common reason for this kind of tragedy is then, at least in my mind, self evident: The mecanism behind are the human rational thougt!
First, let us look at what a common is. According to Wikipedia it is "... a parcel of land, usually near the centre of towns and villages, which is thought to be owned 'in common' by all the members of the community." This leads to the assumption that there is no regulation in the individual access to the recources of the common from those members of the community. This is the reason why goverments has to "take possession" of this land and regulate the harvesting of resources. The fact that "... this definition is actually a widely held misconception", to quote the Wikipedia, has no bearing on the conclusion in this case, since it is this misconception that is the basis for govermental intervention and of human rationalization.
One could look upon a market as a form of common. Every market is, on the most fundamental level, made up of two parts: money and people. If one of these are missing, you do not have a market. Then the next question is: what is the recource basis of a market; where do the people get their money? The evident answer is; from work in some kind of business. So a market is thereby a product of those who live of the market. The businesses both contribute to the market as well as harvest from it. To create a stable market the in- and outflow from the businesses must be balanced.
Up to our time the markets of this planet has been devided by space, politics and culture. The different markets traded between eachother and thereby could exploit their own particular strength. The reason for this was that what a market exported was worth less home than it was in the target market. You harvested the recources within a market/country, which in this connection were of no value, exported them to a place they were valuable and thereby imported money to found your own home market. This interplay between many different markets has been the true source of wealth.
But now things have changed. The markets are more and more integrating, becoming one global, free market, "The Free Market". Let us then take the words of Garret Hardin from 1968 and rewrite them for 2005 with this new understanding of the concept of markets as commons in mind. This is maybe how it would sound:
"The tragedy of the free markets develops in this way. Picture a market open to all businessmen. It is to be expected that each businessman will try to earn as much money as possible in the markets. Such an arrangement may work reasonably satisfactory for centuries because scarcity of trading goods, limiting laws, and import/eksport duty keep the number of businessmen and customers in balance in each local market. Finally, however, comes the day of reckoning, that is, the day when the long-desired goal of a global market becomes a reality. At this point, the inherent logic of the market remorselessly generates tragedy.
As a rational being, each businessman seeks to maximize his gain. Explicitly or implicitly, more or less consciously, he asks, "What is the utility to me of firing one more worker from my business?" This utility has one negative and one positive component.
1. The positive component is a function of the reduction of one worker. The extra workload has to be carried by his former co-workers. This is called rationalization. But, since the businessman receives all the proceeds from the firing of the additional worker, the positive utility is nearly + 1.
2. The negative component is a function of the additional reduction of the market created by one less income. Since, however, the effects of market reduction are shared by all the businessmen, the negative utility for any particular decisionmaking businessman is only a fraction of - 1. And the larger the market is, the smaller this fraction will be.
Adding together the component partial utilities, the rational businessman concludes that the only sensible course for him to pursue is to fire another worker from his business. And another.... But this is the conclusion reached by each and every rational businessman sharing a market. Therein is the tragedy. Each man is locked into a system that compels him to decrease his working force without limit -- in a world that is limited.
Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the markets. Freedom in a global market brings ruin to all."
The same kind of rationalization can be used when it comes to reducing the wages of the workers, the mechanism within "The tragedy of the commons" will produce the same end result.
And this mechanism has been, and are, at work in the global market today. The globalists are steadily working towards one global, free market. And in doing this they are destroying the wery thing that keeps them, and us, economically alive. To illustrate this point, let me quote from The Baltimore Chronicle:
"By substituting foreign for American workers, US corporations are destroying their American markets. As American jobs in the higher paying manufacturing and professional services are given to Asians, and as American school teachers and nurses lose their occupations to foreigners imported under work visa programs, American purchasing power dries up, especially once all the home equity is spent, credit cards are maxed out and the dollar loses value to the Asian currencies." This is "The tragedy of The Free Market" at work.
But there are more to learn from this mechanism of tragedy. Both the free harvesting of biological recources and the harvesting of a free market is destructive in nature. The herdsman and the businessman are both, in principle, thinking the same way and thereby acting subsequently. It is the way they think wich lead to the way they act.
The common reason for this kind of tragedy is then, at least in my mind, self evident: The mecanism behind are the human rational thougt!
posted by Mrreg at 23:02
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