{"id":63596,"date":"2022-04-02T10:42:39","date_gmt":"2022-04-02T14:42:39","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=63596"},"modified":"2022-04-05T11:11:31","modified_gmt":"2022-04-05T15:11:31","slug":"disadvantages-of-a-free-market","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/disadvantages-of-a-free-market\/","title":{"rendered":"The Disadvantages of a Free-Market Economy"},"content":{"rendered":"\n<p>What are the major disadvantages of a <a href=\"https:\/\/www.shortform.com\/blog\/free-market-economic-system-2\/\">free-market economy<\/a>? In what way is <a href=\"https:\/\/www.shortform.com\/blog\/free-market-system\/\">the price system<\/a> unjust?<\/p>\n\n\n\n<p>In his book <em>What Money Can&#8217;t Buy, <\/em>philosopher Michael J. Sandel argues that market values have become society\u2019s dominant moral framework, the lens through which we determine what is important or unimportant as well as right and wrong. He argues that the free market is unjust and restrictive because they create injustices and eliminate choice. <\/p>\n\n\n\n<p>Keep reading to learn about the disadvantages of the free-market economy, according to Sandel.<\/p>\n\n\n\n<!--more-->\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-markets-are-unfair-and-restrictive\"><strong>Markets Are Unfair and Restrictive<\/strong><\/h2>\n\n\n\n<p>Sandel mentions two key disadvantages of a free-market society: 1) free markets create inherent inequalities and injustices and 2) free markets often <em>eliminate <\/em>free choice for people and force them to make dangerous or unethical decisions.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-the-injustices-of-the-price-system\"><strong>The Injustices of the Price System<\/strong><\/h3>\n\n\n\n<p>Earlier, we explored the pro-market argument that prices represent the fairest and most equitable way to allocate society\u2019s scarce resources. According to this argument, if the price of a good (in a properly functioning market) reflects its true value and someone\u2019s willingness to pay<em> <\/em>that price reflects how much they<em> <\/em>value that good, then prices will always get the goods to those who value them most.<\/p>\n\n\n\n<p>However, Sandel writes that <strong>the distribution of resources\u2014often <\/strong><strong><em>essential <\/em><\/strong><strong>resources\u2014on the basis of the price system is incompatible with widely accepted moral principles<\/strong>.&nbsp;<\/p>\n\n\n\n<p>He writes that someone\u2019s willingness to pay the asking price for something does not necessarily mean that they need or want it more than someone else, and that, therefore, free markets create inherent inequalities and injustices.&nbsp;<\/p>\n\n\n\n<p>Those with substantial means can afford things they don\u2019t need, while those with insufficient means are unable to acquire basic resources like food, shelter, clothing, or healthcare. While Sandel acknowledges that this may be \u201cefficient\u201d from a purely economic perspective, it is not morally correct for some people to be deprived of things they need while others have more than they can ever consume.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong><a href=\"https:\/\/www.shortform.com\/blog\/inconspicuous-consumption\/\">Conspicuous Consumption<\/a> and Luxury Taxes<\/strong><br><br>Sandel\u2019s idea of rich people being able to afford goods they don\u2019t need\u2014and thereby driving up prices for everyone else\u2014is closely related to what\u2019s known in economics as <a href=\"https:\/\/www.britannica.com\/topic\/conspicuous-consumption\">conspicuous consumption<\/a>. This is the practice by which consumers demand either a larger quantity or higher quality of goods than they actually need or more than is economically efficient. Conspicuous consumption is often for show\u2014people buy visible, materialistic things to demonstrate their wealth, prestige, or social status to others.<br><br>Some economists view the existence of conspicuous consumption as a symptom of troubling wealth inequality and a waste of capital that could otherwise be directed toward more economically and socially useful purposes. To correct this problem, many jurisdictions have imposed <a href=\"https:\/\/www.investopedia.com\/terms\/l\/luxury_tax.asp\">luxury taxes on expensive goods<\/a> like yachts, jewelry, private jets, and furs.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Shortform Example: Inequality and the US Healthcare System<\/strong><br><br>For an example of Sandel\u2019s argument that free markets generate unjust inequalities, we can look to the <a href=\"https:\/\/www.shortform.com\/blog\/problems-with-healthcare-in-the-us-system\/\">American healthcare<\/a> system.&nbsp;<br><br>In the US, employers contract with for-profit insurance companies to provide health coverage for their employees. These employees then seek treatment from for-profit doctors and nurses at for-profit hospitals and clinics. Unfortunately, people who are either unemployed or who can\u2019t afford to purchase health insurance on the open market have no choice but to forgo treatment\u2014indeed, as of 2018, <a href=\"https:\/\/www.theguardian.com\/us-news\/2020\/apr\/16\/profit-over-people-cost-over-care-americas-broken-healthcare-exposed-by-virus\">nearly 28 million Americans had no health insurance at all<\/a>. And even those Americans who <em>do <\/em>have insurance often find themselves <a href=\"https:\/\/www.vox.com\/health-care\/2019\/3\/19\/18233051\/surprise-medical-bills-arbitration-new-york\">saddled with surprise six-figure medical bills<\/a>, sending them into bankruptcy and financial ruin.&nbsp;<br><br>This goes against what many consider to be a core tenet of medical ethics\u2014that <a href=\"https:\/\/www.who.int\/news-room\/commentaries\/detail\/health-is-a-fundamental-human-right\">access to healthcare is a fundamental human right<\/a> that should not be rationed according to someone\u2019s ability to pay for it.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-when-free-markets-aren-t-free\"><strong>When Free Markets Aren\u2019t Free<\/strong><\/h3>\n\n\n\n<p>Sandel further argues that <strong>\u201cfree\u201d markets are often instruments of coercion\u2014pushing people to make dangerous and unethical choices<\/strong> that they would never make without the pressure of having to compete and succeed in the market.&nbsp;<\/p>\n\n\n\n<p>He writes that living in a <a href=\"https:\/\/www.shortform.com\/blog\/market-society\/\">market society<\/a> puts individuals and families under constant strain\u2014they need to earn enough money to afford the basic necessities of life like food, shelter, education, and healthcare. Most earn the money they need by selling their labor to an employer. Sandel notes that this type of employment is not <em>necessarily <\/em>coercive or exploitative\u2014after all, employees are free to leave their jobs whenever they like for any reason they wish.&nbsp;<\/p>\n\n\n\n<p>However, Sandel notes that <strong>the pressure of surviving in a capitalist society often puts people in positions where they must, out of sheer necessity, exploit themselves for profit<\/strong>. Since such people are often facing severe material deprivation, they are ripe for such exploitation. He argues that if people are forced into dangerous economic activities\u2014like participating in medical testing for potentially dangerous medications\u2014out of sheer desperation, then they cannot be said to be truly \u201cfree.\u201d&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Positive and Negative Liberty<\/strong><br><br>Other writers have explored Sandel\u2019s idea that people facing severe economic hardship aren\u2019t \u201cfree\u201d in any meaningful sense. Most famously, philosopher and political theorist Isaiah Berlin (1909-1997) argued that <a href=\"https:\/\/plato.stanford.edu\/entries\/liberty-positive-negative\/\">there are two types of liberty\u2014positive and negative liberty<\/a>.&nbsp;<br><br>Negative liberty is simply freedom <em>from <\/em>external constraints. As long as you\u2019re not physically or legally prevented from taking a particular action, you enjoy negative liberty. Thus, a supporter of free markets might argue that as long as someone is able to enter into contracts on whatever terms they agree to with another party without interference from an external entity (usually the government), they are free.<br><br>Positive liberty, however, is defined by a mastery of the self and one\u2019s own destiny. This means having control over your mind, your future, and your material circumstances. Rather than freedom <em>from <\/em>constraints, it is the freedom <em>to <\/em>achieve your highest potential. Thus, for example, if you suffer from a disadvantaged social position\u2014whether due to poverty, racial discrimination, or lack of education\u2014you will be unable to realize your destiny and are not truly free, even if there are no formal restrictions standing in your way.&nbsp;<br><br>Although he doesn\u2019t explicitly mention it, when Sandel writes that people forced into exploitive economic relationships out of desperation aren\u2019t truly free, he is in effect arguing that they lack positive liberty.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Selling Your Own Data<\/strong><br><br>For an example of this kind of exploitation, we can look to the growing business of <a href=\"https:\/\/slate.com\/technology\/2020\/04\/sell-your-own-data-bad-idea.html\">people selling their data<\/a> to tech companies. Specific examples include Facebook <a href=\"https:\/\/www.theverge.com\/2019\/1\/29\/18202880\/facebook-research-enterprise-root-certificate-onavo-techcrunch\">paying teenagers $20 per month for unlimited access to their phone activity<\/a> and Amazon paying people $25 (in Amazon gift cards) <a href=\"https:\/\/www.businessinsider.com\/amazon-offers-gift-cards-in-exchange-for-3d-body-scans-2019-5\">for their body scans<\/a>.&nbsp;<br><br>While advocates of this practice have hailed it as empowering for consumers\u2014giving them the freedom to treat their consumer, personal, financial, and demographic data as a marketable commodity that they\u2019re free to sell\u2014detractors see it another way. They argue that such schemes are an affront to personal dignity, privacy, and human rights because they transform human beings into data-generating profit points.&nbsp;<br><br>Further, these schemes create an inherent disparity in privacy between economic classes. If people become desperate enough that they must sell their own data to be harvested, extracted, and resold for profit, then privacy <em>itself <\/em>becomes a luxury good\u2014available to those who are wealthy enough not to have to commodify their data but denied to everyone else who must, out of necessity, \u201cconsent\u201d to sell away their dignity.<\/td><\/tr><\/tbody><\/table><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>What are the major disadvantages of a free-market economy? In what way is the price system unjust? In his book What Money Can&#8217;t Buy, philosopher Michael J. Sandel argues that market values have become society\u2019s dominant moral framework, the lens through which we determine what is important or unimportant as well as right and wrong. He argues that the free market is unjust and restrictive because they create injustices and eliminate choice. Keep reading to learn about the disadvantages of the free-market economy, according to Sandel.<\/p>\n","protected":false},"author":8,"featured_media":63759,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[81,21,24],"tags":[597],"class_list":["post-63596","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics","category-philosophy","category-society","tag-what-money-cant-buy","","tg-column-two"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.3 (Yoast SEO v24.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The Disadvantages of a Free-Market Economy - Shortform Books<\/title>\n<meta name=\"description\" content=\"The free market is a subject of never-ending debate. According to Michael Sandel, the disadvantages outweigh the advantages. 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