Markets Against the Mob's Purpose By Pierre Lemieux

Caleb Brown of the Cato Institute reminds us that yesterday would have been the 201st birthday of Frederick Douglass, a slave who escaped Maryland in 1838, thereby valiantly breaking the law. The Economist of January 25 contains two articles apparently unrelated, but illustrating, each one in a different way, an important feature of free markets. This feature is known to economists since Gary Becker’s work.

One of the Economist’s articles is about brands: “It Has Never Been Easier to Launch a New Brand.” It shows how a brand has a value for consumers (which, in turn, gives the brand its monetary value), but can be displaced by new brands. It observes that the new brands now often feel obliged to have a “brand purpose,” which can be interpreted as a social purpose. The Economist avoids the s-word here, but this is obviously what purpose-boosting people mean. A social purpose means following a dominant fad, usually of the politically-correct sort. The social purpose is signaled by, for example, minimizing a firm’s “carbon footprint” or “buying local”, although the show-off can be less politicized and consist of giving a percentage of profits to a charity–remembering, however, that many charities are themselves politicized. Older brands have been obliged to follow:

In 2018 Delta, another airline, and Hertz car-rental, among others, revoked discounts for members of America’s National Rifle Association.

The other article is quite different. Titled “When America’s Open Road Wasn’t Open to All,” it is a review of Overground Railroad: The Green Book and the Roots of Black Travel in America, a book by Candacy Taylor. Taylor’s book tells the story of another book, the Negro Motorist Green-Book, published annually from 1936 to 1967, to inform traveling blacks where they would be welcome in hotels, restaurants, gas stations, or even public beaches and picnic places, instead of being harassed and humiliated if not worse. It seems to me that, in a very real sense, segregation was the social purpose of the time. Fortunately, free markets mitigated it: many private venues openly welcomed blacks. Oftentimes, no doubt, it was because of the profit motive, which is a feature not a bug of free markets. This point is unfortunately not underlined in the review, and I don’t know if the book also missed it.

A different book, which I will review in the Spring issue of Regulation—Jonathan Rothwell, A Republic of Equals: A Manifesto for a Just Society (Princeton University Press, 2019)—illustrates the same idea with the case of zoning. Zoning was created to prevent immigrants and blacks from moving into white neighborhoods with their dollars. Despite the social purpose of the time, it was impossible to prevent entrepreneurs from building apartment houses in white neighborhoods, because landowners and entrepreneurs were too tempted to make money by offering the sort of housing many poor immigrants and blacks wanted in good neighborhoods. A real estate agent quoted by the New York Times of August 4, 1898 said it clearly:

I assure you there is no sentiment about the property owners bringing colored people here. It is purely a matter of dollars and cents and self-interest. The negroes pay their rent regularly, and many of the white people do not.

Zoning—restricting the construction of apartment houses, the height of buildings, and urban density in general—was the political solution consistent with the social purpose. According to Rothwell, the blacks’ handicaps are still, in large part, due to this official housing segregation of which they have been victims.

We can see why social-purpose people, whether on the right or on the left, hate free markets: because free markets defeat the social purpose. When it receives a political expression, the social purpose represents the collective oppression of some individuals. Free markets allow individuals outside the social purpose to earn a living and to buy goods and services, albeit with more efforts than for social favorites. The government usually follows the social purpose, that is, the mob.

One counter-argument is that “social” is not synonymous with “the mob.” This is true, but only if “social” means free individuals living together in a context of free exchange.