Friday, 9 March 2007

My Economic Philosophy - 3 (Les droits inaliénables)

(This is the third of n pieces on my emerging economic philosophy called Liquidism.)

Pardon my French, but if we're going to talk about two distinct definitions of freedom, and the first is called laissez-faire (a freedom without restrictions), what do we call the second (a freedom that cannot be taken away)? Droits inaliƩnables (inalienable rights)? Quite a mouthful, so I'll tell you what. We'll call it Liquidism.

Why? Because as any student of economics knows, the system where no individual player has the power to force any other player to act against their will is called Pure Competition. A market that demonstrates Pure Competition is said to be liquid. Oligopolistic and Monopolistic markets are highly illiquid.

Want a system where players' rights can never be taken away? You're basically asking for Pure Competition. Is that too idealistic?

Look at the Free Software/Open Source ecosystem. The GNU General Public License (GPL) guarantees a freedom that cannot be taken away. Most other licenses (BSD, MIT, X11, Apache, etc.) represent freedom without restrictions. Which is the more successful in practice? About 68% of all software projects on SourceForge (the world's largest repository of Free/Open Source software) have adopted the GNU GPL, which shows that most Free/Open Source software developers seem to believe that a freedom that cannot be taken away is in fact the greater freedom.

I think this latter view of freedom is an idea whose time has come. Economists of every shade have been brandishing their single favourite economic parameter. Some claim that a balanced government budget is the holy grail, with government controlling both spending and taxation to achieve this goal. Others claim that inflation must always be contained within 2-3%, with the central bank flicking interest rates up or down to keep inflation in its place. Yet others claim that full employment is the state to be aspired to, with all economic parameters primed to encourage constant growth.

So let me throw my hat in the ring. I want a free market, and I don't mean a laissez-faire free market. I mean a free market whose freedom cannot be taken away. And that means an activist government unafraid to wield a powerful instrument - Antitrust.

Liquidism's distinguishing feature is a highly competitive market, maintained if necessary, by aggressive antitrust enforcement on a hair-trigger.

I know it sounds radical, and it conjures up a vision that may be deeply disturbing to some.
See an emerging monopoly or oligopoly? Break 'em up!
Receive a merger proposal between major players? Deny permission.
Detect a pricing cartel? Throw the bosses in jail and ban them from holding similar office in future.

It may seem like a wild-eyed, revolutionary and ultimately impractical idea, but is it? In the fourth piece on Liquidism, I will argue that this is merely the next evolutionary step in modern macroeconomic thought.

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