Glenden BrownWhen the free market works exactly as it should it can still deliver unhappy outcomes
Paul Krugman has an essay in his book The Great Unraveling about English food and the problems of the free market. Krugman’s point is simple: England urbanized as methods for storing food leapt forward - canning, bottling, etc. With few options available to them other than mushy peas and tasteless canned fruit, the English came to accept bad food as the norm (and preparation methods matched the food - fry it, boil it, salt the hell out of it, serve it). The free market was working - it delivered the product people wanted, but the market itself is two way - it shapes people’s expectations as it is shaped by their demands. People who grew up eating poor tasting, low quality food, they didn’t demand better. The market worked - but it reached an unhappy equilibrium and stayed there a long time. Only in recent years has English food become edible (something that has occurred ironically as many Brits have rediscovered unique local flavors and products as well as they have discovered other cuisines).
Two interesting books about American food - David Kamp’s The United States of Arugula and Paul Lukacs American Vintage discuss the rise of American foodie culture in recent decades from our culinary low point in the tuna casserole era of 50s, 60s and 70s.
At one time, the US had thriving regional cuisines - connected to local producers and ecologies that had distinct and remarkable flavors. These regional cuisines were often influenced by immigration patterns - as people immigrated from Italy, they brought with them the flavors of their homeland and adapted them to what would and would not grow in the US.
By the 1930s, a variety of forces - including the emergence of popular, nationwide chains serving standardized menus, rising urbanization the separated Americans from the farms, and perhaps most importantly massive grocery stores chains - conspired to create an American cuisine dominated by blandness, in which haute cuisine was almost always at a “French” restaurant where dishes arrived at your table smothered in various sauces and gravies, in which Chow Mein and Chop Suey were the epitome of Chinese food, in which tacos and fresh pastas were exotic. One of the biggest changes, also, was architectural. Kitchens were small to reflect the idea that cooking was drudgery.
Don’t think Americans couldn’t cook - we could then and we can now (I’m may be indulging in some nationalistic chest thumping, but I think the US is at the forefront of cooking and dining today). If you don’t have fresh herbs and spices and peppers and lemongrass you can’t make a convincing curry and without fresh garlic and cilantro you can’t turn out a convincing salsa.
Authors churned out cookbooks on how to make one dish meals or how to cook your entire meal using only your toaster oven, blenders, and packaged foods (take three cans of tuna fish, a can of sliced olives and two teapsoons of dried onions, add two cans of condensed mushroom soup, stir together, top with grated cheddar cheese and potato chips and bake at 350 until hot all the way through).
The problem of post-War American cooking was created, ironically, by the free market working well - we had an excess of food, readily available at reasonable prices, but so much of it was processed and packaged for maximum length of storage time. The outcome was a culinary culture of abundance (even excess) but with undistinguished flavors - the market succeeded beyond anyone’s expectations but in doing so, created a mediocre and sustainable equilibrium.
Why do I relate these tales of not exactly woe? It’s unseemly to complain about having too much boring food in a world where millions are starving.
The free market worked - it just produced an outcome that was less the optimum. The free market isn’t a single entity - it’s not an entity at all. The free market is a metaphor for the outcomes created by our collective decisions - millions of individuals making choices create the market. That our choices are often contradictory, confusing, even self-defeating is largely irrelevant. So long as one of us wants to buy something and another wants to sell, the market can function. Such a system, however, is open to manipulation (the stock market in the 1920s was openly manipulated by a group of wealthy men) and the creation of monopolies. It creates bubbles and panics and hysterias. It can crash for no reason at all or for good reasons. At times, it rewards irrational behavior and at other times punishes it. The Enlightenment model of the rational decision maker is misleading - people aren’t rational decision makers. The market misfires. The Stock Market is a perfect example - from time to time (the 1920s, the 1990s, today) stock values become separate from underlying value or performance. The free market economy can successfully create wealth and just as easily destroy it. It creates products that can be exemplary (the iPod) and awful (see 1970s Cadillac). Success in the economy often holds the seeds of its own undoing.
Knowing these things can happen should inform and guide our current decisions. We need effective regulations - banking is simply too important to be left to bankers. We need effective government policies - if we’re going to bail out companies, we have the right to demand fiscal prudence in return, and to cap salaries and bonuses and to demand reforms of business models. We have a right to legislate acceptable accounting practices and to demand transparency and honesty in corporate annual reports and so on (and punish those who fail to behave in ways which are honest). My point is simply this: we have a right as participants in and creators of the free market to expect government to act as a counterweight to corporations, to act on our behalf to protect us from deliberate manipulations and dishonesty. We can expect the government to help level the playing field and guarantee that corporations don’t hide information - drugs that kill, accounting that is dishonest and misleading, false and double dealing - that benefit them at a cost to the rest of us. It’s not antithetical to the free market, it is part and parcel of it.
The free market is many things - but it is not perfect. Some things it does with incredible alacrity and efficiency, others with incredible clumsiness. Knowing what we know about the free market, there is no reason we should have blind faith in it, nor should we trust its high priests who assure us it will solve all the problems. There are many things it does well and we should leave it well enough alone but there are many areas in which it performs badly or in which its imbalances are damaging to the common good (i.e. air and water pollution) and we should not feel guilty about trying to figure out which is which and doing what is necessary.
November 20th, 2008 at 3:09 pm
Glendon, your post reminded me how back in the 60s and 70s the Ritz cracker box had a Mock Apple Pie recipe in which you used Ritz crackers instead of sliced apples. One could only ask, “Why?”
Great post. The ultimate proof of what you say is the current state of our economy.
November 20th, 2008 at 4:51 pm
Becky - I remember seeing that recipe. I never read it, but I always assumed the crust was ritz crackers, not the filling.
November 20th, 2008 at 6:27 pm
In Philosophy, we might reference this as adaptive preference. It works both ways. When we “need” an SUV because the average around us is 4 cars per family, we have adapted. When the people who are starving are happy to receive a single meal, they are doing the same thing in the opposite direction.
The good news is that it works both ways. If we can begin the process of adapting to locally generated power and conservation, and do it correctly, we can begin to adapt to the direction that idea goes, and begin saving even more power. If we can adapt to giving in sustainable ways people in need, we might just be able to make it a habit.
The trouble is generally getting the direction right. After that, it can snowball just fine on its own…
November 21st, 2008 at 6:49 am
What is striking is your boundless faith in the power of government to solve the market’s shortcomings in the face of a history that clearly demonstrates how clueless our politicians are in their efforts to manage the economy. Everything you are proposing has been tried before and failed. Wage and price controls were the norm during the Nixon administration. Remember stagflation?
It is ironic that you’ve chosen agriculture as the industry where the free market has failed. You’ve naively ignored the fact that there hasn’t been a free market in food in this country in decades. Farmers received subsidies and incentives from the government to produce the kinds of food our markets were flushed with in the 50’s, 60’s and 70’s. Local farming and produce were discouraged because giant operations could better take advantage of government programs created to benefit agriculture. It didn’t take long for them to realize that if they could influence government policy (the free market clearly wasn’t where decisions were being made) they could make even more money. Now large agricultural interests have some of the most powerful lobbyists and politicians money can buy and the continuation of incredibly foolish and shortsighted government ag policy is the result. Can you imagine the elimination of sugar subsidies ever getting through congress right now? How about corn? The free market didn’t fail the American palate over those bland decades you’re complaining about. Our government did.
Leftists always bitch and moan about how the free market can be manipulated. They rarely consider that government is always more open to and accepting of self-interested manipulators than the free market.
November 21st, 2008 at 7:10 am
Jeremy - I didn’t say the free market failed, I said that when it works exactly as it should it can produce less than ideal outcomes. What other entity besides the government exists that can protect the common interest with regard to problems like pollution? The problem of government being influenced by lobbyists and industries is, equally, a one stop shop solution - ultimately government is more open to citizen pressure than are corporations. The influence of corporations and industries and their lobbyists is a distortion of how government should work and must be reformed.
November 21st, 2008 at 8:50 am
Glen,
Your agriculture example didn’t work so well. Do you have a better one to support your “less than ideal outcomes” thesis?
Getting rid of corporate influence is as simple as a “one stop shop” solution eh? Not bloody likely. When you put government into the business of regulating capitalists you get capitalists interested in influencing government. It seems that you’re arguing that the right politicians are all we need to get human nature repealed. That just doesn’t make any sense.
November 21st, 2008 at 10:41 am
Jeremy - I’m not sure you get my argument. I’m not saying the free market failed. It worked exactly as it was supposed to and the outcome was profoundly mediocre. People who grew up eating one dish meals made with canned peas, canned tuna, canned soup, and velveeta don’t generally demand better meals - they’ve never developed the taste for good food.
Prohibiton did far more than government agriculture subsidies to kill American food culture. Why? The traditions of fine dining were broken, the connection between food and wine severed. America’s winemakers were driven out of business and entire skillsets lost for a generation. It’s not accidental that today the Napa Valley has some of the finest restaurants and dining the US. The repeal of prohibition came too late to save the majority of America’s wineries. The industry didn’t begin to recover until the 1970s. Bear in mind that from the perspective of the Prohibitionists, this was a desirable outcome. The other side of the free market equation was - you guessed it - lack of availability of good wine meant few people ever had good wine which meant they didn’t ask for it. The market worked as it was supposed to it just produced an undesirable outcome.
November 21st, 2008 at 12:02 pm
Glen,
I realize you’re not arguing that free market capitalism has failed. I’m pointing out that the mediocre outcome you are decrying isn’t the fault of free market capitalism but constant and malignant government involvement in the market.
Lack of good wine was a problem but it didn’t cause a glut of processed food in grocery stores. Government agriculture policy brought us that curse when it subsidized and encouraged grain crops at the expense of more perishable and tasty local produce. I’ll buy your wine explanation as a part of the yucky food problem but how does that relate to the free market? Prohibition was a government action.
You argued that when the free market works “as it should” it brings undesirable outcomes. You used bland food during the mid 20th century as proof of this thesis without showing that this problem can actually be blamed on the free market. In fact…the problem you’re decrying appears to be a direct result of government meddling with the market by banning one substance (alcohol) then later subsidizing others (grain crops). Maybe I’m not getting your argument because it doesn’t seem very coherent.
November 21st, 2008 at 12:48 pm
the market is a feedback mechanism - the supply side and demand side working together. When the supply side only delivers one narrow range of product, it influences the demand side - in the case of American food in the mid 20th century, American consumers had been trained by American suppliers to accept bland food (similar dynamic as in England a century before). Supply shapes demand as much as demand shapes supply. Agricultural subsidies followed rather than led demand. Prohibition was a much more direct attack on the market, one that grew out of a frustrated social movement (the temperance movement).
It’s a mistake to conceive of the government as separate from the market. Laws as often as not express the will of the people who make up the demand side of the market (though not always, i.e. medical marijuana). The government cannot be separated from the market and usually lags behind popular demand. In both passing then repealing Prohibition, the government was actually following the popular will, i.e. the demand side of the market. That it would have failed in its goal should have been obvious up front but oh well. Agricultural subsidies were a supply side solution pushed by suppliers not a demand side issue. The supply side, in this case, shaped the demand. Government was not the primary driver on either issue - it was driven by forces in the market - always a mistake and I believe an abdication of gov’t’s role.
November 21st, 2008 at 2:50 pm
If it is a mistake to conceive of the government as separate from the market than we are no longer talking about a free market. Your post should be titled “When the Mixed Market Works Exactly As It Should It Can Still Deliver Unhappy Outcomes”.
The idea that laws “make up the demand side of the market” is alien in a free market by definition. Perhaps we seem to be talking past each other because you aren’t really complaining about free market capitalism but America’s hybrid market based command economy. If so than I completely agree with your original point that it tends to bring about less than desirable results.
You’ve probably already heard of it but a great book on the issue of food, farm policy, and happy eating is “The Omnivore’s Dilemma” by Michael Pollan. I highly recommend it. I’m checking my library this evening for the books you mentioned. I’m quite passionate about the issue of good food…probably too much so.
November 21st, 2008 at 2:59 pm
Jeremy - I prefer American Vintage to the United States of Arugula, but both are great reads. American Vintage focuses more on wine but the chapter on food is probably the best summary I’ve ever read of America’s changing food culture.
FWIW, even in a completely unregulated market, the government is still a player - through its own purchases.