Regarding the nature of gold’s value, Peter Blegvad has a great song (called “Gold”) about that on his 1990 album “King Strut & Other Stories”.

You can find the lyrics and a nice free cover here: http://www.icompositions.com/music/song.php?sid=77800#

”
Gold would be worthless if it didn’t require
such heartbreak to seek it, to find it and mine it
Things remain precious as long as they’re rare
If gold could be found lying ‘round everywhere
it would be the lowliest of metals, too soft for serious use
Pretty, of course and warm to the touch
but no longer alluring when you’ve handled so much
The lowliest of metals.
“

“freedom” in itself pretty much is a vacuous concept. I’ve e.g. seen economists claiming that “I only want to take away people’s freedom to choose non-sustainably produced food”. I am, by now, fairly sure that you could even easily sell any sort of atrocity under the brand name “freedom”. Shouldn’t we, say, give poor nations “more freedom” by allowing them to trade (non-)prosecution of human rights violations for money? (The “justice voucher” idea).

The key point here is: there is no silver bullet. If you can demonstrate that “freedom” has a precise meaning and amounts to more but a simple rhetoric trick, I’m all ears.

In any case, would I be right to gather that we agree as to the base line for a healthy economy is one that is free? If so, our strategy would be to focus on how we can get there from where we are now.

you claim that: “In the world of economy, taking away regulations might cause shock and the collapse of the system, but unlike a mortal person, the economy will always regenerate.”

I am very disappointed to see that you do not seem to realize that economic “shock and collapse” is a process in which people actually lose their lives. Here is an interesting graph for you to study that shows this: http://preview.tinyurl.com/russia-mortality

Note the quite visible effect of the 1989 collapse of the Soviet bloc on male life expectancy. You talk as if “the economy just recovers and everything will be fine afterwards”. Actually, the situation is literally the same as in medicine: prescribing the wrong drug easily can *kill* people. In that sense, the economic policy-makers has precisely the same sort of responsibility as the physician. It only is frightening to see to what extent policy-makers seem to be unaware of it!

Let us consider a specific example.

The “patent recipe” of the World Bank for water shortages in Cochabamba were to establish a free market by privatizing the city’s water services. Not surprisingly, actually. After all, with hyperinflation in Bolivia since the 80s, the country turned to the World Bank for solutions. The World Bank would lend them money, but, as usual with their “Structural Adjustment Programmes”, coupled to conditions. This has led to policy decisions such as the privatization of Bolivias airlines, rail and telephone system. With water in Cochabamba, the problem was perceived to be that many poor people were not connected to the network, so paid a high price for water brought to them by other means, such as by truck, while the state’s activities to provide cheap water via the network actually were perceived to selectively subsidize richer families and industry (connected to the network).

How did this privatization go? There was a single bidder interested in running the water system – an international consortium. They secured the contract and brought in mostly technical staff (engineers) from developed countries not overly familiar with the socio-cultural situation in Bolivia. Part of the contract with the government was the completion of a somewhat questionable, but fairly expensive project, and to pay for this, the utility company of course raised prices for its water – quite considerably by the way, by roughly 1/3, amounting to $6/month. Now, that might not sound much, but with minimum wage being only about 10 times that, many poor people suddenly were forced to spend more money on water than on food.

Back in 2000, this caused serious unrest, and people got killed. In the end, they returned to the previous arrangement. Not that this would have been a major improvement over the considerable stresses that were tried to resolve through privatization.

Of course, when considering a potentially dangerous drug, a physician has a difficult choice to make. He might risk killing a person. What can he do? If he acts in an ethical and responsible way, he will provide his expertise to the patient in a way that it helps the patient to make an informed decision about the situation – does he want to risk that particular treatment or not? Hence, the concept of “informed consent”. Now, if we applied the concept “voluntas aegroti suprema lex” to economics, that could be the basis for participatory structures. What we have instead is a hybrid system of “one dollar, one vote” and the facade of “representative democracy” to provide the default excuse “your right to complain is at the ballot box, once every so many years”.

Really, the problem is ideologists believing in their silver-bullet miracle cures, who, in applying them, kill people. In the medical profession, we got that problem somewhat under control. So one could say that by now, people no longer get killed by quacks, but get a real chance to get killed by their economic policy equivalents.

Ok, let’s help the doctor with some observations. Before he can determine the efficacy of a drug, first he should establish that it is not harmful. Administered to healthy persons, it should not make them sick. So the doctor will need a few healthy volunteers. They will be given varying doses of the drug, and their health observed over time. If they all fall sick, and if their degree of sickness correlate with the dosage, that observation would be a clear indication that the drug is actually poison. I’m simplifying here. In reality, it is possible for a drug to be beneficial for the sick while on healthy persons what you observe is the bad side effects (for example, chemotherapy).

So it is important to define the baseline, the healthy person, which would correspond to a healthy economy correctly. In my personal opinion, a healthy economy is based on healthy trades, which at it’s most basic level is a voluntary exchange of goods or services by two parties. Any regulations and restrictions will correspond to administering a drug. Sometimes a person does get sick and might need a drug. But a good drug is one that restores balance and allows the person to continue living as before without the need to continue taking the drug. It is a temporary measure, not a permanent one. If a drug is needed permanently, then it can be said that it never cures. It might prolong life, but it is not effective in curing the person. It is certainly possible that in certain cases, taking away the drug means killing the person. In the world of economy, taking away regulations might cause shock and the collapse of the system, but unlike a mortal person, the economy will always regenerate.

Now as Craig mentioned, a good economy is not independent of ethics. I fully agree. Free market is not truly free unless there is also property rights and private ownership. Many of the current environmental issues can be traced to a lack of property rights. But this would be a separate topic in itself.

somewhat frustrated, I must point out that you did not even make the tiniest step towards answering my question. You just presented some self-justification for the free market logic.

A general principle that would have avoided so many tears: For any oh-so-great explanation how the world works (or ought to work), it is worth nothing if you do not have a clear evaluation metric telling you: “If I ever observe X, I am forced to get rid of one of the fundamental assumptions underlying this system of thought. This would invalidate much of the concept.”

If you do not have this, your belief might just be functionally equivalent to that of the physician who treats all his patients with mercury – the worse they feel, the more mercury they have to take. And if they die (all do), that’s “of course precisely because they did not get enough mercury”. What would *you* tell such a physician? I would ask him: “what observation would force you to re-evaluate your belief in mercury being the solution to all problems?” He would not have an answer. And this tells me to stay well away from him as he means trouble.

Now, I am asking *you*, again, “what observation would force you to re-evaluate your belief in the free market being the solution to all problems”?

In a free market, the elements of demand and supply interact to determine the optimum price. When demand for a particular good increases, such as due to population growth or increased standard of living, this will push up the price. For example, say the price of coffee is $2 per kg. As demand goes up, coffee will disappear from store shelves sooner. Retailer will start to increase price to take advantage of the high demand. Price increase will continue until the demand stabilises. Any further price increase will result in leftover coffee on the shelves that will have to be discounted later on to sell.

The high coffee price will encourage existing coffee farmers and new entrepreneurs to grow more coffee which will increase supply. Eventually, the additional supply will reach the market and price will start to decrease. The decrease in price will spur more demand, which will stop further price decrease. The price will settle at a new spot where supply balances demand.

The dynamic of the market is changing all the time. It is important to note that the price will always settle at a point where the supply balance demand.

But suppose for example, when the demand for coffee increases, instead of allowing the price to rise, a regulation is created to place a cap on the coffee price. Coffee will continue to disappear from the shelves, but as the price is capped, there is no incentive for new coffee farms or for existing farmers to expand. So what will happen next? Subsidies and grants will be given to encourage more coffee growers. The subsidies mean that coffee price at the farm has increased, but at the market, it will be still be the same old price. What an unbalance! Interesting phenomena isn’t it? If looked at the regulations in isolation, they seem good (who wouldn’t like price of goods to stop increasing? can we have a cap on petrol price as well?) For the producers, who wouldn’t want subsidies and grants to increase their profit (or even just to enable them to continue business). But looking at the big picture, these regulations result in unbalances.

So to tell what causes a problem, it is necessary to look at the details and also the big picture of how people and processes interacts.

one specific problem I am having with this idea of “the free market will solve all problems” is that it is very easy to blame all sorts of problems on not having a free market somewhere.

So, the key question here is: What sort of observation can you use as a criterion to discern between a problem that ultimately is caused by a non-free market, and a problem that has other causes?

>>”The ‘healthy scenario’ relies just as much on freedom from political coercion as the organ trade scenario would. Free people could choose either course of action. It’s our job to help people choose wisely via education and demonstration of permaculture’s benefits.”

Agreed!

I’m just saying that whilst ‘freedom’ is essential, if ‘freedom’ is not wielded by an ethically-motivated populace, then it’ll still all end in tears.

An unrestrained ‘free Market’ system, whether it be in organs or other, will end up being based on ever increasing consumption. “We need to sell more organs!” You can only increase consumption by increasing demand (I can almost see the heart, lung and liver upgrade adverts now – “Add years to your life with a tri-pack install today!”). How to contain the present demand for perpetual ‘economic growth’ unless the market is controlled by moral power, at an individual and collective level. The term ’sustainable growth’ is an oxymoron. The exponential function, combined with the realities of living on a planet that cannot inflate to accommodate it, means we will only survive if we discover/build an economy that is not based on continual growth. Tell me how the invisible hand can accomplish this without some kind of system of restraint. Ideally that restraint would be at the individual level – rather than enforced from above – but that can only occur if everyone in the system is operating ethically, with a mind for everyone around them.

Not sure if I can make it any clearer (Did you read the link in my last comment?)

People argue over left and right constantly. Particularly now. But to ignore what I’m saying, I believe, will just continue the pendulum, and history, swinging back and forth between these two ‘options’, without actually solving our problems.

I personally suspect we’ll never learn this lesson, and we’ll instead watch the world sink into a more fascist, centrally controlled government that takes its cues from big industry.

If people do realise the moral aspect of what I’m saying, but fail to actually achieve it (a widespread resurgence in ethical values that respect individual rights/beliefs, etc.), then there’s also, unfortunately, the definite possibility that, instead of this grass roots resurgence in compassion and morality, morality itself will be prescribed by the same government/big industry collusion – but with set, inflexible parameters that don’t take individual opinions/beliefs/freedom into account. We’ve seen it many times before – when church and state were integrated, and a predetermined set of ‘moral guidelines’ was enforced. That always ends in tears too. (Think dark ages, for one example.)

I don’t see why you say “The healthy scenario is based on ethics and restraint, whereas the ‘free market’ organ trade scenario is based on disease and misery.”

The ‘healthy scenario’ relies just as much on freedom from political coercion as the organ trade scenario would. Free people could choose either course of action. It’s our job to help people choose wisely via education and demonstration of permaculture’s benefits.

It seems I agree with pretty much everything you wrote here, except that I am willing to continue the salvage effort on the term “free market” and say that we must have one to live well. Free people can be persuaded to our way of thinking and make changes in their lives; slaves of political masters cannot.