Markets or Morals?

In Human Action, Ludwig von Mises writes:

Successful businessmen are called kings or dukes, their enterprises an empire, a kingdom, or a dukedom. If this idiom were only a harmless metaphor, there would be no need to criticize it. But it is the source of serious errors which play a sinister role in contemporary doctrines.

But this passage appears within a section entitled "The Sovereignty of the Consumers." Prima facie, that is harmless. The consumer is sovereign—over himself. But Mises does not stop with that notion. He writes:

The direction of all economic affairs is, in the market society, a task of the entrepreneurs. Theirs is the control of production. They are at the helm and steer the ship. A superficial observer would believe that they are supreme. But they are not. They are bound to obey unconditionally the captain's orders. The captain is the consumer. Neither the entrepreneurs nor the farmers nor the capitalists determine what has to be produced. The consumers do that. If a businessman does not strictly obey the orders to the public as they are conveyed to him by the structure of market prices, he suffers losses, he goes bankrupt, and is thus removed from his eminent position at the helm.

If Mises has not, strictly speaking, reintroduced the metaphor of political rule into the economic realm, he has come close. He has introduced the metaphor of the economy as a tightly run business corporation, where some people (the consumers) are bosses giving orders, and others (the entrepreneurs and capitalists) are workers, carrying out the orders.

In Capitalism, George Reisman presents much the same picture.

If the consumers decide to buy more of product A and less of product B, the production of A automatically becomes more profitable and that of B less profitable. Capital then flows to A and away from B. The production of A is thus expanded and that of B contracted, until, once again, both A and B afford neither more nor less than the general or average rate of profit." (174)

Going further than Mises, Reisman writes: "The consumer is king, as the saying goes." At this point, a political metaphor has been reintroduced into an economic context.

More important, the Mises-Reisman description of the market should not be one that appeals to Objectivists. It is Peter Keating, not Howard Roark, who gives consumers what they want. When Mrs. Wayne Wilmot comes to Roark for an English Tudor house he says:

"You'll have to go to some other architect, Mrs. Wilmot."

She stared at him incredulously.

"You mean, you're refusing the commission?"

"Yes."

"You don't want my commission?"

"No."

"But why?"

"I don't do this sort of thing."

"But I thought architects…"

"Yes. Architects will build you anything you ask for. Any other architect in town will."

Of course, if any other architect in town will build an English Tudor house, then Reisman's principle about the shifting of production and capital will remain true to all intents and purposes. But suppose no other architect in town will build an English Tudor house, for exactly the same reasons that Roark will not. And suppose, in addition, that English Tudor houses are being demanded not only by Mrs. Wilmot but by all or most of the people seeking new homes. What then shall we say about the authority of the consumer?

The short answer, I suppose, is that every architect will soon be out of business, or at least out of the home-building business. True. But would-be new-home buyers will be without English Tudor homes, and that is supposed to be impossible under the picture of the market painted by Mises and Reisman. Clearly, then, that picture requires an additional premise. What? That those who produce for markets are fundamentally unrestricted by their values and people like Roark do not exist? That is the condemnation of the market system on which Garry Wills built his early career. Are we now to embrace it? Or must we change our picture of the market?

The question may seem unimportant when based on so unrealistic an example as the one above. But it becomes important if we make the example realistic.

There now exist a number of fine libertarian authors, but they could far greater fame and fortune if they wrote from a liberal perspective. Does anyone suppose that they check the market for selling out before putting pen to paper?

Take an even more realistic example, though one of vicious values rather than virtuous values. Capitalists, and George Reisman in particular, have argued that racial segregation would disappear under capitalism.

The businessman seeking profit is vitally dependent on the patronage of customers. This dependency is expressed in such popular sayings as "the customer is king" and "the customer is always right." Blacks are customers, and, as they rose economically, would be more and more important customers. It is absurd to believe that businessmen would want to turn customers away by denying them access to their premises or humiliating them with such requirements as separate drinking fountains. (Capitalism, p. 199)

But evil men can be as true their values as good men are to theirs. And if any two sayings do not characterize Howard Roark, they are "the customer is king" and "the customer is always right."

So which virtue shall we claim for capitalism? That its producers are free to stick by their values, despite the demands of consumers? Or that producers will overlook all rational and irrational distinctions among people and products in pursuit of money? And if we claim the former, but not the latter, what becomes of our claim that capitalism provides the market with ever-shifting, and always efficient flows of production and capital?

The debate continues: Markets or Morals?. Also, read the Letters to the editor in response

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