« True free markets have never been tried », this is the point of this article ; it is possible to make it clear with a simple « mathematical » abstraction.

One can assemble as X’s all forms of government intervention (Xa for the bank oligopoly, Xb for regulations and standards, Xc for all taxes, Xd for other infringements on personal freedom such as gun laws, the draft etc.) and Y’s all issues with the economy today (Ya for inequalities, Yb for pollutions, Yc for economic instability, Yd for insecurity, etc).

Most people tend to be simply unable to try and risk the following : bringing all X’s on one side of the equation and all Y’s on the other side.

They say for instance : « Ok I know that Xa may be linked to Yc but I claim that putting Xc and Ya on the same side will reduce Ya » (« I believe taxation can reduce inequalities », to write it non-mathematically). They never consider the simple argument that putting all the X’s on one side and the Ys on the other, by ending all forms of government intervention, has never been tried. We simply have no experience on what the results could be (we only have experience for partial attempts where not all the X’s where put on the same side – they never were). If you try to start a discussion you will receive replies containing themselves a contradiction, i.e. acknowledging the market is not perfectly free but still blaming the free markets, not recognizing that the equation has never been solved once anywhere in the world ; you cannot judge a result without knowing it. You cannot simply pretend the result (« a free market society ») is already here, while the equation is not solved.

Another way of formulating it is the Lipsey Lancaster paradox, which can be restated simply : « so long as some X’s will be on the same side as Y’s (i.e. the market is imperfectly free), then it’s not free at all » (which is why many have attempted to use that paradox to defend government solutions – « we have not managed to kill all the mygals, so let’s instead let them invade our homes and tame them » is a funny yet realistic restatement of that « second-best argument »). The fully free market of the neoclassics can be assimilated to Ludwig von Mises’ ever-spinning economy. Any argument such as « let us put one X with one Y because we believe government can solve Y » is idealistic. The X’s and Y’s are balanced and there is no way any exogeneous factor interferes. And Mises was certainly the first to really make the direct point that all forms of idealism have to be rejected strongly, as unable to do the equation-solving work, and to make way for a true free-market society.

The Lipsey-Lancaster paradox is highly interesting as it points out that so long as we are not at a 100 % free society, getting closer to it (i.e. from 98 % to 99 % and then from 99 % to 99,2 %, to 99,99999… % etc) is not getting anywhere (i.e. being at 99,999 % close to a free market is the exact equivalent of being at 0%).

Thus we are in a situation where people are still attempting to solve the equation by doing more work with solutions already tried while leaving vacant a simple way to resolve it which is also what all mathematicians, faced with an equation, do : putting the X’s on one side, the Y’s on another is the most basic way of going forward in solving the equation and to discover that, as Austrians have for long hypothesized, the X’s equal the Y’s and that there is no exogeneous factor making any of the X’s needed for the benefit of the many.

The Lipsey Lancaster paradox is a very simple way to reply to all the socialists of all movements blaming the free market – the situation that we are in fact at 0 % is obvious through many regards. Every entrepreneur with a sharp eye knows it, the barriers are just hidden deeper and higher, and banks, especially, make it look like « it is capitalism that is to blame ». It is extremely easy to see that banks are subordinated to governments granting them rights and organizing the financial markets, and will never support entrepreneurs with ideas going against the interest of the elected. Government will never help you solve the equation showing its direct responsibility in all the ills it claims to fight everyday.

*****

I also recommend my article on why repressed homosexuals are always and everywhere defenders of the State (link) and on how private police & justice & defense work easily (link).