UTILITARIANISM AND THE FREE MARKET
19. Free market (editors mean laissez-faire): Minimum government involvement in the market, only what is necessary for there to be a free market
20. Argument for the view that the free market maximizes overall good of society (and thus is justified by utilitarian ethical theory)
a. Car buying example (p. 32) shows how free market maximizes preference satisfaction:
i. People freely pursuing their self-interest in a market will be led by an invisible hand (Adam Smith’s) to the greatest overall good.
b. Trading in a free market results in people being better off after the trade than before (otherwise why would they trade?)
c. Trading in a free market, makes people better off with no one being made worse off (a “Pareto improvement”)
i. This is not the same as the maximum utility goal of utilitarianism but is a step in that direction
ii. Worry about a Pareto improvement “harming” someone by putting them in relative disadvantage?
21. Problems to consider
a. What if one person needs the car more than others and does not have the $ to outbid someone who needs (or even wants) it less?
i. Wouldn’t utility be maximized if that person got the car?
b. The market will produce yachts and vacation homes for the wealthy before housing/health care for the poor
i. Anti-utilitarian: Presumably more overall social good is produced when a homeless person gets a home than when a wealthy person gets a 2nd home
c. Above criticism ignores the production side: Why is the wealthy person wealthy and the poor person poor? It might well be because the wealthy person has produced goods/services that others find valuable (are willing and able to pay for) while the poor person has not produced such goods (or if he/she has, then she has already spent the money)
i. Having the $ to buy things is a sign that one has done things that others consider useful (or rather are willing and able to pay for)
ii. Not having $ is a sign that one doesn’t have skills others find useful or that one refuses to use them or that one foolishly wastes one’s resources
d. This response ignores that much wealth is not earned or deserved but is a matter of luck (a big inheritance from parents)
e. Also, ignores that people produce valuable things for society that people don’t or can’t or shouldn't pay for
i. E.g., public servants, school teachers, inspiration of friends