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I propose that voters should ask themselves a simple question: Are markets friendly? Do they exist today to serve society’s best interests, or are they currently a hostile force? If voters believe the latter—as, I’ll explain, I think they should—they ought to support candidates who back more government intervention, and vice versa.
Are markets friendly? riffs on Albert Einstein’s famous (but apparently apocryphal) observation that to him the only important question was Is the universe friendly? His question addressed our relationship to cosmic forces beyond our control; mine addresses our relationship to economic forces that seem beyond our control but that, in fact, are within our powers to alter.
My question will cause economists to choke on their cereal, because a “friendly” market is not an economic term. But it does work, I think, as a device to help organize voters’ thoughts along margins that otherwise are too abstract and too overwhelming to comprehend.
My question focuses on “markets,” not “companies” or “businesses,” because markets are where investment and production are allocated through the mechanism of prices. Companies act in markets, but they are not themselves the market. The question also ignores the useless term the economy. Most individuals care about jobs; some lucky ones care about their savings; entrepreneurs care about opportunities; and companies care about profits. “The economy,” by which pundits usually mean the gross domestic product, is just the sum of all these inputs. Policies act on these inputs, not on “the economy” as such.
A “friendly” market does not necessarily mean a kind one, but it does mean a market that is fair, open to all, efficient in allocating investment and production through the signaling mechanism of prices, and bound by rules that reflect Americans’ values. The economist’s shorthand for these requirements is that markets must be competitive and complete.
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In competitive markets, no business can dictate prices to customers; all fight for survival in environments where profit margins are slim. A friendly market is not a synonym for a “business friendly” environment, where firms make fat and easy profits, but rather signifies a marketplace where businesses scrap for every little advantage.
As Adam Smith observed, businesses often are the enemies of genuinely competitive markets. A business cannot help but want to make things easy for itself, for example, by co-opting government to protect itself from market competition. Contemporary politicians eager to protect or subsidize some company or industry—for example, through tariffs—in fact have been co-opted in the same way that Smith warned about almost 250 years ago.